Ranjan Kishore Routh, Kolkata V. ITO, Ward - 33(1), Kolkata, Kolkata

ITA 391/KOL/2011

• Counselvise Citation: 39123514 RSA 2011
• Duration Of Justice: 4 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 09-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DEBASHIS ROY
• Assessee Lawyers: T P KAR

Judgement Text

I.T.A. NO . 391 / KOL ./20 1 1 ASSESSMENT YEAR: 200 6 - 200 7 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.K. BANSAL , ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH , JUDICIAL MEMBER I.T.A. NO. 391 / KOL / 20 1 1 ASSESSMENT YEAR : 200 6 - 20 0 7 RANJAN KISHORE ROUTH,............................. . ..... ... .. .APP ELL ANT 16B, SHAKESPEARE SARANI, KOLKATA - 700 071 [PAN :ACRPR 6699 D] - VS. - INCOME TAX OFFICER, ... . ....................... ...... ... . RESPONDENT WARD - 33(1), KOLKATA APPEARANCES BY: SHRI T.P. KAR, A.R., FOR THE ASSESSEE SHRI DEBAS HIS ROY, SR. D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : APRIL 13 , 2 01 5 DATE OF PRONOUNCING THE ORDER : APRIL 13 , 201 5 O R D E R PER P.K. BANSAL : THIS A PPEAL HA S BEEN FILED BY THE ASSESSE E AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) - XX , KOLKATA IN APPEAL NO. 3 4 7/CIT(A) - XX /WD - 33(10/08 - 09/KOL. D ATED 07 . 12 .20 1 0 FOR THE ASSESSMENT YEAR 200 6 - 0 7 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: - ( 1 ) WHETHER THE ASSESSING OFFICER IS CORRECT IN TREATING THE SERVICES OF TH E EXPERIENCED BUT PROFESSIONALLY AND TECHNICALLY UNQUALIFIED PERSONS SHALL BE TREATED AS THE PROFESSIONAL PERSONS AND ACCORDINGLY THE EXPENSES RELATING TO THEIR SERVICES FOR RS.1,52,400/ - TO MIHIR BISWAS, RS.44,150/ - TO CHANDRA NATH BASAK AND RS.40,000/ - T O INDOMAN ENGINEERING SERVICES ARE COVERED UNDER SECTION 40(A)(IA) READ WITH SECTION 194J OR 194(C)(I) OF THE INCOME TAX ACT, 1961, WHERE THE APPELLANT IS AN INDIVIDUAL. I.T.A. NO . 391 / KOL ./20 1 1 ASSESSMENT YEAR: 200 6 - 200 7 PAGE 2 OF 7 ( 2 ) WHETHER THE ASSESSING OFFICER IS CORRECT IN DISALLOWING THE LIQUIDATED DAMAGES FOR RS. 2,57,853/ - CONSIDERING IT AS PRIOR YEAR EXPENSES WHEN THE COURTS ORDER RELATING TO THE SAID EXPENSES WAS RECEIVED IN THE ASST. YEAR 2006 - 07. 2. GROUND NO. 1 RELATES TO THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) READ WITH SECTION 194J OR 194(C)(I) OF TH E INCOME TAX ACT. 3. BRIEF F ACTS RELATING TO THIS GROUND OF APPEAL ARE THAT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE WAS A CONTRACTOR AND, THEREFORE, HE WAS LIABLE TO DEDUCT TAX ON THE AMOUNT PAID TO SHRI MIHIR BISWAS AMOUNTING TO RS.1,52,400/ - , DRAW ING AND DESIGN CHARGES PAID AMOUNTING TO RS.44,150/ - TO SHRI CHANDRA NATH BASAK, AND RS.40,000/ - PAID TO M/S. INDOMAN ENGINEERING SERVICES. THE ASSESSING OFFICER ALSO NOTED THAT THE ABOVE PERSONS ARE QUALIFIED ENOUGH TO BE TREATED AS RENDERING TECHNICA L OR PROFESSIONAL SERVICES AND, THEREFORE, THE ASSESSEE WAS LIABLE TO DEDUCT TAX UNDER SECTION 194J AND, THEREFORE, THE ASSESSING OFFICER DISALLOWED A SUM OF RS.2,36,550/ - BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT . BEFORE US, LD. A.R. VEHE MENTLY CONTENDED THAT THE AMOUNT PAYABLE AT THE END OF THE YEAR WAS NIL AND ALL THE AMOUNTS TOWARDS RETAINER - SHIP CHARGES, DRAWING AND DESIGN CHARGES WERE PAID DURING THE YEAR, THEREFORE, THE PROVISIONS OF SECTION 40(A)(IA) WERE NOT APPLICABLE IN THE CASE OF THE ASSE SSEE. 4. LD. D.R. ON THE OTHER HAND RELIED ON THE DECISION OF THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF CRESCENT EXPORTS SYNDICATE IN ITA NO. 23 OF 2013 . 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. THIS ISSUE, IN OUR OP INION, IS IN NO MORE RES - INTEGRA , IN VIEW OF THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CRESCENT EXPORTS SYNDICATE IN ITA NO. 23 OF 2013, IN WHICH THE HON BLE CALCUTTA HIGH COURT TOOK THE FOLLOWING VIEW: - I.T.A. NO . 391 / KOL ./20 1 1 ASSESSMENT YEAR: 200 6 - 200 7 PAGE 3 OF 7 BEFORE DEALING WITH THE S UBMISSIONS OF THE LEARNED COUNSEL APPEARING FOR THE ASSESSEES IN BOTH THE APPEALS WE HAVE TO EXAMINE THE CORRECTNESS OF THE MAJORITY VIEWS IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS . WE ALREADY HAVE QUOTED EXTENSIVELY BOTH THE MAJORITY AND THE MINORI TY VIEWS EXPRESSED IN THE AFORESAID CASE. THE MAIN THRUST OF THE MAJORITY VIEW IS BASED ON THE FACT THAT THE LEGISLATURE HAS REPLACED THE EXPRESSION AMOUNTS CREDITED OR PAID WITH THE EXPRESSION PAYABLE IN THE FINAL ENACTMENT. COMPARISON BETWEEN THE PRE - AMENDMENT AND POST AMENDMENT LAW IS PERMISSIBLE FOR THE PURPOSE OF ASCERTAINING THE MISCHIEF SOUGHT TO BE REMEDIED OR THE OBJECT SOUGHT TO BE ACHIEVED 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 WHI CH 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 . H AVING 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 DEDUC T TDS ON SUCH EXPENSES ARE DISALLOWED . HAVING HELD SO WAS IT OPEN TO THE TRIBUNAL TO SEEK TO JUSTIFY THAT THIS FICTION CANNOT BE EXTENDED ANY FURTHER AND, THEREFORE, CANNOT BE INVOKED BY ASSESSING OFFICER TO DISALLOW THE GENUINE AND REASONABLE EXPENDIT URE ON THE AMOUNTS OF EXPENDITURE ALREADY PAID ? DOES THIS NOT AMOUNT TO DELIBERATELY READING SOMETHING IN THE LAW WHICH IS NOT THERE? WE, AS SUCH, HAVE NO DOUBT IN OUR MIND THAT THE LEARNED TRIBUNAL REALIZED 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 I.T.A. NO . 391 / KOL ./20 1 1 ASSESSMENT YEAR: 200 6 - 200 7 PAGE 4 OF 7 DISALLOWANCE SHALL BE RESTRICTED TO THE MONEY WHICH IS YET TO B E 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 STEE L INDUSTRIES VS. BOMBAY IRON & STEEL LABOUR BOARD REPORTED IN 2010(2) SCC 273. UNPROTECTED WORKER WAS FINALLY DEFINED IN SECTION 2(11) 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 TH E PROVISIONS OF THIS ACT IS NOT ADEQUATELY PROTECTED BY LEGISLATION FOR WELFARE AND BENEFITS OF THE LABOUR FORCE IN THE STATE , THESE PRECISE WORDS WERE REMOVED BY THE LEGISLATURE AND THE DEFINITION WAS MADE LIMITED AS IT HAS BEEN FINALLY LEGISLATED UPON. IT IS TO BE NOTED THAT WHEN THE BILL CAME TO BE PASSED AND RECEIVED THE ASSENT OF THE VICE - PRESIDENT ON 05 - 06 - 1969 AND WAS FIRST PUBLISHED IN THE MAHARASHTRA GOVERNMENT GAZETTE EXTRAORDINARY, PART IV ON 13 - 06 - 1969, THE AFOREMENTIONED WORDS WERE OMITTED. TH EREFORE, THIS WOULD BE A CLEAR POINTER TO THE LEGISLATIVE INTENT THAT THE LEGISLATURE BEING CONSCIOUS OF THE FACT AND BEING ARMED WITH ALL THE COMMITTEE REPORTS AND ALSO BEING ARMED WITH THE FACTUAL DATA, DELIBERATELY AVOIDED THOSE WORDS. WHAT THE APPELLAN TS ARE ASKING WAS TO READ IN THAT DEFINITION, THESE PRECISE WORDS, WHICH WERE CONSCIOUSLY AND DELIBERATELY OMITTED FROM THE DEFINITION. THAT WOULD AMOUNT TO SUPPLYING THE CASUS OMISSUS AND WE DO NOT THINK THAT IT IS POSSIBLE, PARTICULARLY, IN THIS CASE. TH E 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 RATE CASE AND THUS SUPPLYING OF THIS CASUS OMISSUS WOULD BE EXTREMELY NECESSARY DUE TO T HE 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 DE DUCTIBLE 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 A N I.T.A. NO . 391 / KOL ./20 1 1 ASSESSMENT YEAR: 200 6 - 200 7 PAGE 5 OF 7 AMOUNT HAS NEITHER BEEN PAID NOR CREDITED, THERE CAN BE NO OCCASION FOR CLAIMING ANY DEDUCTION. THE LANGUAGE USED IN THE DRAFT WAS UNCLEAR AND SUSCEPTIBLE TO GIVING MORE THAN ONE MEANING. BY LOOKING AT THE DRAFT IT COULD BE SAID THAT THE LEGISLATURE WANTED TO TREAT THE PAYMENTS MADE OR CREDITED IN FAVOUR OF A CONTRACTOR O R SUB - CONTRACTOR DIFFERENTLY THAN THE PAYMENTS ON ACCOUNT OF INTEREST, COMMISSION OR BROKERAGE, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES BECAUSE THE WORDS AMOUNTS CREDITED OR PAID WERE USED ONLY IN RELATION TO A CONTRACTOR O R SUB - CONTRACTOR. THIS DIFFERENTIAL T REATMENT WAS NOT INTENDED. THEREFORE, THE LEGISLATURE PROVIDED THAT THE AMOUNTS, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER 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 O R SUB - CONTRACTOR SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME OF AN ASSESSEE IN CASE HE HAS NOT DEDUCTED, OR AFTER DEDUCTION HAS NOT PAID WITHIN THE SPECIFIED TIME. THE LANGUAGE USED BY THE LEGISLATURE IN THE FINALLY ENACTED L AW 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 MR. ROYCHOWDHURI THAT THE SECOND PROVISO SOUGHT TO BECOME EFFECTIVE FROM 1 ST APRIL, 2013 SHOULD BE HELD TO H AVE ALREADY BECOME OPERATIVE PRIOR TO THE APPOINTED DATE CANNOT ALSO BE ACCEDED TO FOR THE SAME REASON INDICATED ABOVE. THE LAW WAS DELIBERATELY MADE HARSH TO SECURE COMPLIANCE OF THE PROVISIONS REQUIRING DEDUCTIONS OF TAX AT SOURCE. IT IS NOT THE CASE OF AN INADVERTENT ERROR. FOR THE REASONS DISCUSSED ABOVE, WE ARE OF THE OPINION THAT THE MAJORITY VIEWS EXPRESSED IN THE CASE OF MERILYN SHIPPING & TRANSPORTS ARE NOT ACCEPTABLE. THE SUBMISSIONS ADVANCED BY LEARNED ADVOCATES HAVE ALREADY BEEN DEALT WITH AND REJECTED. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DISMISS THE GROUND NO. 1 TAKEN BY THE ASSESSEE. 6. GROUND NO. 2 RELATES TO THE SUSTENANCE OF DISALLOWANCE OF LIQUIDATED DAMAGES AMOUNTING TO RS.2,57,853/ - . LD. A.R. BEFORE US VEHEMENTLY CONTENDED T HAT THE ASSESSEE HAS PAID TO M/S. PANPOSE REFRACTORIES & CERAMICS WORKS A SUM OF RS.2,57,853/ - IN TERMS OF THE HON BLE HIGH I.T.A. NO . 391 / KOL ./20 1 1 ASSESSMENT YEAR: 200 6 - 200 7 PAGE 6 OF 7 COURT S ORDER IN THE CASE FILED BY THE SAID FIRM AGAINST THE ASSESSEE FOR REALIZING THE DUES AMOUNTING TO RS.2,42,147/ - AS ON 1 ST AP RIL, 2004. THE HON BLE COURT DIRECTED TO PAY A SUM OF RS.5,00,000/ - TO THE ASESSEE. THE ASSESSEE PAID RS.4,00,000/ - ON 11.08.2004 AND RS.1,00,000/ - ON 13.08.2004 IN TERMS OF THE ORDER OF THE HON BLE HIGH COURT. THE COPY OF THE ORDER WAS NOT RECEIVED DURING THE SAID FINANCIAL YEAR AND THE COPY OF THE ORDER WAS FINALLY RECEIVED IN THE FINANCIAL YEAR 2005 - 06. THE ASSESSEE DEBITED THE SAID SUM AS LIQUID ITY DAMAGES DURING THE IMPUGNED ASSESSMENT YEAR AND CLAIMED THE DEDUCTION FOR THE SAME IN THE PROFIT & LOSS AC COUNT. THE EXPENSES CANNOT BE SAID TO BE PRIOR PERIOD EXPENDITURE BUT ACCRUED DURING THE IMPUGNED ASSESSMENT YEAR. 7. LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDER OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDER ED THE SAME ALONG WITH THE ORDER OF THE TAX AUTHORITIES. WE DIRECT ED THE LD. A .R. TO LET US KNOW THE DATE WHEN THE ORDER WAS RECEIVED BY THE ASSESSEE, BUT HE COULD NOT ADDUCE ANY EVIDENCE TO PROVE THAT THE ORDER WAS RECEIVED BY THE ASSESSEE IN THE IMPUGNED A SSESSMENT YEAR. IN VIEW OF THIS FACT, IN OUR OPINION, THE EXPENDITURE NEITHER RELATES TO THIS YEAR NOR ACCRUED DURING THE IMPUGNED ASSESSMENT YEAR. WE, THEREFORE, DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE ORDER OF THE LD. CIT(APPEALS) SUSTAINING THE D ISALLOWANCE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH APRIL , 201 5 . SD/ - SD/ - MAHAVIR SINGH P.K. BANSAL ( JUDICIAL MEMBER) ( ACCOUNTANT MEMB ER) KOLKATA, THE 13 TH D AY OF APRIL , 201 5 COPIES TO : (1) RANJAN KISHORE ROUTH, 16B, SHAKESPEARE SARANI, KOLKATA - 700 071 I.T.A. NO . 391 / KOL ./20 1 1 ASSESSMENT YEAR: 200 6 - 200 7 PAGE 7 OF 7 (2) INCOME TAX OFFICER, WARD - 33(1), KOLKATA (3) COMMISSIONER OF INCOME - TAX (APPEALS) (4) COMMISSIONER OF INCOME TAX ( 5 ) THE DEPARTMENTAL REPRESENTATIVE ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA B ENCHES, KOLKATA LAHA/SR. P.S .