SHRI RAJENDRA YADAV, Ajmer V. CIT, Ajmer

ITA 895/JPR/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5546 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 29-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Non-deduction of tax; Non compliance
• Section: 194C; 201(1); 154

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NO.895/JP/2012 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2007-08 . SHRI RAJENDRA YADAV, M/S. SHREE RAM MARBLE, RATHIYON KA MOHALLA, VILL. GAGWANA, AJMER. CUKE VS. THE INCOME TAX OFFICER, WARD 1(3), AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAPQY 3915 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY S BY : SHRI G.C. JAIN (ITP) JKTLO DH VKSJ LS@ REVENUE BY : SHRI O.P. BHATEJA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 30.11.2015. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 29/01/2016. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THE APPEAL FILED BY THE ASSESSEE IS ARISING FROM T HE ORDER DATED 27.02.2012 PASSED BY THE LEARNED CIT (A), AJMER FOR THE A.Y. 2 007-08. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- (1) THAT THE LD. CIT (A) GROSSLY ERRED IN LAW AND ON FA CTS IN REJECTING THE APPLICATION U/S 154 AND THEREBY AGREEING WITH THE A DDITION OF RS. 7,51,322/- U/S 40 (A)(IA) OF I.T. ACT, 1961 AS CON FIRMED BY THE PREDECESSOR CIT (A) AS PER HIS ORDER DATED 27.02.21 2. 2 ITA NO. 895/JP/2012 A.Y 2007-08. SHRI RAJENDRA YADAV VS. ITO AJMER. (2) THAT THE LEARNED CIT (A) GROSSLY ERRED IN LAW & ON FACTS IN APPLYING PROVISIONS OF SECTION 40 (A)(IA) NOTWITHSTANDING T HE FACT THAT SECTION 40 WITH CLAUSES (A), (B) & (C) IS SUBJECT TO NON-OBSTA NTE CLAUSE WITH WHICH SECTION 40 STARTS (NOT WITH STANDING ANYTHING TO TH E CONTRARY IN SEC. 30 TO 38 AND HENCE THE ITEMS COVERED BY SEC. 30 TO 38 ONL Y ARE HIT BY SEC. 40 (A)(IA) AND FOR FAILURE TO DEDUCT TAX IN TERMS OF S ECTION 194C SUCH PAYMENTS ONLY ARE LIABLE TO DISALLOWANCE. (3) THAT IN VIEW OF SECTION 40 WHICH IS VERY UNAMBIGUOU S THE DENIAL OF DEDUCTION BY THE LEARNED CIT (A)/AO OF THE PAYMENTS FOR NON DEDUCTION OF TAX THEREON, LD. CIT(A) ONLY BE OF THOSE PAYMENT S COVERED U/S 30 TO 38 AND FOR FAILURE TO DEDUCT TAX ON PAYMENTS OTHER THA N SEC. 30 TO 38, THERE ARE OTHER CONSEQUENCES LIKE INTEREST AND PENALTY IN TERMS OF SECTION 201 OF THE ACT AND NOT THE DISALLOWANCE U/S 40 (A)(IA) OF THE ACT. 2. THE APPEAL HAS BEEN FILED WITH A DELAY OF 211 DA YS. THE LD. A/R FOR THE ASSESSEE HAS REQUESTED TO CONDONE THE DELAY AND DECIDE THE A PPEAL ON MERITS. IN SUPPORT OF HIS REQUEST TO CONDONE THE DELAY, THE LD. A/R FURNISHED AFFIDAVIT OF THE ASSESSEE EXPLAINING THE REASON FOR DELAY. WE ARE SATISFIED WITH THE RE ASONS GIVEN BY THE ASSESSEE, THEREFORE, THE DELAY CAUSED IS CONDONED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE DE RIVES INCOME FROM TRADING OF MARBLE TILES AND SLABS. THE MARBLE BLOCKS ARE PURCH ASED AND CONVERTED INTO MARBLE TILES AND SLABS AND THEN SOLD TO VARIOUS PARTIES I.E. DIR ECTLY TO THE CONSUMERS AS WELL AS TO RETAILERS. IT IS THE CASE OF THE ASSESSEE THAT FOR THE PURPOSES OF CONVERTING THE MARBLE BLOCKS INTO MARBLE TILES, THE JOB IS REQUIRED TO BE DONE OUTSIDE ON JOB WORK BASIS. IT IS ALSO THE CASE THAT NO FORMAL CONTRACT WAS ENTERED B ETWEEN THE APPELLANT AND THE SUCH JOB WORKER. THEREFORE, THE PAYMENTS OF SAWING AS C UTTING CHARGES WERE MADE TO SUCH PERSONS ON THE BASIS OF WORK DONE BY THEM. THE ASSE SSEE HAS SHOWN THE TOTAL PAYMENT MADE TO THE FOLLOWING THREE PERSONS NAMELY M/S. GAR VIT STONEX KISHANGARH RS. 3 ITA NO. 895/JP/2012 A.Y 2007-08. SHRI RAJENDRA YADAV VS. ITO AJMER. 1,54,711/-, M/S. CHANDA MARBLES RS. 3,92,711/- AND M/S. NIDHI GRANITES RS. 2,28,700/- TOTALING RS. 7,76,122/-. THE AO WHILE FINALIZING T HE ASSESSMENT OF THE ASSESSEE, HAS MENTIONED AS UNDER :- THE ASSESSEE HAD MADE REGULAR PAYMENTS AGAINST TH E JOB CHARGES BATCH/BILL WISE AS DETAILED IN THE EDGE CUTTING & SA WING EXPENSES REPRODUCED ABOVE ON REGULAR BASIS TO FEW LIMITED PE RSONS WHICH CLEARLY GOES TO INDICATE AN IMPLIED ORAL CONTRACT. SECTION 194C PRESCRIBES FOR DEDUCTION OF TAX FOR CARRYING OUT ANY WORK IN PURSU ANCE TO CONTRACT BETWEEN THE CONTRACTOR AND THE CONTRACTEE. AS STATE D EARLIER AS PER CONTRACT ACT THERE IS NO COMPULSION FOR A CONTRACT TO BE IN WRITING. THE BEHAVIOR OF THE ASSESSEE AS REFLECTED BY HE ACCOUNT SQUARELY COVERS THE TRANSACTION BETWEEN THE ASSESSEE AND THE PERSONS TO WHOM JOB CHARGES HAVE BEEN PAID AS CONTRACT. EVEN IF THE CONTENTION OF THE ASSESSEE IS TAKEN FOR GRANTED FOR A WHILE THE NATURE OF PAYMENT WOULD HAVE BEEN IN THE NATURE OF SALARY OR WAGES. WHEREAS IN THE CASE UNDER CONSIDERATION THE PAYMENTS HAVE BEEN MADE BILL WISE/LOT WISE WHIC H CLEARLY INDICATES THAT THE MARBLE BLOCKS WERE SUPPLIED TO THE PERSONS FOR THE CUTTING & SAWING GOT DONE OR THOSE PERSON SUPPLIED THE LABOUR FOR DOING THIS WORK. IT IS BEYOND ANY STRETCH OF IMAGINATION THAT ANY PE RSON MIGHT HAVE DONE CUTTING & SAWING WORK OF THE MAGNITUDE SHOWN BY WAY OF PAYMENTS. ABOVE PAYMENT TO M/S. GARVIT STONEX, M/S. CHANDA MA RBLES & M/S. NIDHI GRANITES SHOWS AN AVERAGE CUTTING & SAWING WORK OF MORE THAN RS. 2155/- PER DAY. WHICH IS ONLY POSSIBLE WHEN THE WOR K IS GOT DONE BY EMPLOYING LABOURS IN A GOOD NUMBER. THIS CLEARLY DE TERMINES THE NATURE OF PAYMENT OF JOB CHARGES/EDGE CUTTING & SAWING BE VERY WELL COVERED UNDER THE DEFINITION OF CONTRACT AND WITHIN AMBIT O F SECTION 194C OF IT ACT, 1961. THEREFORE, THE ASSESSEE WAS LIABLE TO MA DE DEDUCTION OF TAX AT SOURCE U/S 194C WHICH ASSESSEE HAS NOT DONE. SECTIO N 40(A)(IA) 4 ITA NO. 895/JP/2012 A.Y 2007-08. SHRI RAJENDRA YADAV VS. ITO AJMER. SPECIFICALLY PROVIDES FOR NON DEDUCTIBILITY ALLOWAB ILITY OF EXPENSES WHERE NO DEDUCTION OF TAX IS MADE. THE AO ON THE BASIS OF ABOVE SAID CONCLUSION HAS MA DE THE ADDITION OF RS. 7,51,322/- BY RESORTING TO SECTION 40(A)(IA) OF THE IT ACT. 4. FEELING AGGRIEVED BY THE ORDER PASSED BY THE AO, THE ASSESSEE HAS PREFERRED APPEAL BEFORE LD. CIT (A), WHO VIDE HIS ORDER DATED 27.02.2012 HAS CONFIRMED THE ORDER PASSED BY HE AO AND HAS MENTIONED AS UNDER :- AO HAS RIGHTLY OBSERVED THAT PAYMENTS OF SAWING C HARGES AND EDGE CUTTING CHARGES TO THE THREE PARTIES ARE LIABLE FOR DEDUCTION OF TDS, BECAUSE THE PAYMENTS ARE IN THE NATURE OF CONTRACTU AL PAYMENTS. THERE IS NO REQUIREMENT THAT A CONTRACT HAS TO BE IN WRITING . THE PRESENCE OF CONTRACT HAS TO BE INFERRED FROM THE NATURE OF TRAN SACTIONS. IN VIEW OF FACTS MENTIONED BY AO IN THE ASSESSMENT ORDER IT IS CLEAR THAT THE PAYMENT RE COVERED BY SEC. 194C AND APPELLANT WAS L IABLE TO MAKE DEDUCTION OF TAX. AS THE SAME WAS NOT DONE, AO HAS RIGHTLY MADE DISALLOWANCE U/S 40(A)(IA) AND HER ACTION IS CONFIR MED. ADDITION OF RS. 7,51,322/- IS CONFIRMED. GROUND NO. 1 OF THE APPEAL IS THUS DISMISSED. 4.1. THE ASSESSEE HAS PREFERRED RECTIFICATION APPLI CATION UNDER SECTION 154 OF THE IT ACT BEFORE LD. CIT (A). THE CONTENTION OF THE ASSE SSEE WAS RECORDED BY THE LD. CIT (A) IN PARA 3.0 OF HIS ORDER AS UNDER :- 3.0. DURING THE PRESENT PROCEEDINGS MR. ARINJAY J AIN, ADV. & A/R OF THE APPELLANT ATTENDED AND APPELLATE ORDER ALONG WITH T HE SUBMISSIONS MADE VIDE LETTER DATED 16.04.2012 WERE DISCUSSED WITH HI M. THE APPELLANT HAS BASICALLY CONTENDED IN HIS ABOVE LETTER THAT PAYMEN TS ON ACCOUNT OF EDGE 5 ITA NO. 895/JP/2012 A.Y 2007-08. SHRI RAJENDRA YADAV VS. ITO AJMER. CUTTING AND SAWING CHARGES WERE PROCESSING EXPENSES AND NOT CONTRACTUAL PAYMENTS. IT WAS ALSO MENTIONED THAT CASE WAS DECI DED BY CIT (A) WITHOUT PROVIDING OPPORTUNITY TO ASSESSEE. THE APPE LLANT ALSO CONTENDED THAT THE DECISION OF THEN LD. CIT (A) CAN BE RECTIF IED IN VIEW OF CASE LAW ON THE MATTER. AFTER RECORDING THE CONTENTION OF THE ASSESSEE, THE LD. CIT (A) HAS REJECTED THE RECTIFICATION APPLICATION MENTIONING THAT THERE IS NO MISTAKE APPARENT FROM THE RECORD AND THE ORDER PASSED BY LD. CIT (A) IS ON THE BASIS OF MERIT. 5. FEELING AGGRIEVED, THE ASSESSEE HAS PREFERRED AP PEAL BEFORE US, THOUGH BELATEDLY. THE DELAY IN FILING THE APPEAL HAS ALREA DY BEEN CONDONED. 5.1. THE LD. A/R FOR THE ASSESSEE SUBMITTED AS UNDE R :- 4. AS STATED ABOVE, THE APPELLANT HAD NOT ENTERED INTO ANY CONTRACT WITH ANY OF THE PARTIES. THE WORK OF EDGE CUTTING AND SAWING OF THE MARBLE BLOCKS FOR THE PURPOSES OF MAKING THE GOODS SALEABLE AS MARBLE TILES N SLABS WAS GOT DONE FROM THE 3 PARTIES AND T HEY WERE MADE PAYMENTS WITH REFERENCE TO THE WORK DONE BY THEM. THERE WAS EITHER ANY CONTRACT IN WRITING OR AN ORAL CONTRACT BUT SIMPLY IT WAS AN UNDERSTANDING BETWEEN THE APPELLANT AND THE JOBBER IN SUCH AN UND ERSTANDING CANNOT PARTAKE THE CHARACTER OF CONTRACT WITHIN THE DEFINI TION OF THE CONTRACT ACT. ACCORDING TO SECTION 2(H) OF CONTRACT ACT, CONTRACT IS AN AGREEMENT ENFORCEABLE BY LAW BUT FROM THE FACTS OF THE CASE, IT IS CLEARLY EVIDENT THAT THERE IS NO SUCH AGREEMENT BETWEEN THE PARTIES, THE RE IS NOTHING TO SUGGEST THE COURSE OF ACTION IF ANY TO BE TAKEN FOR DAMAGES FOR BREACH OF CONTRACT WHICH COULD BE SAID O HAVE EMERGED AS A RE SULT OF ACCEPTANCES OF THE OFFER IF ANY BY THE OTHER PARTY. THEREFORE, I F FOR A MOMENT, IT IS TAKEN TO BE AN ORAL CONTRACT, EVEN THEN LEGALLY SPEAKING, THERE CANNOT BE SAID TO BE AN AGREEMENT ENFORCEABLE BY LAW AND THAT BEING S O, I6HIN THE MEANING OF THE CONTRACT ACT, THERE WAS NO SUCH CONTRACT L IABLE TO THE PROVISIONS OF SECTION 194C OF THE INCOME TAX ACT, 1961. SECTION 194C OF THE INCOME TAX ACT 1961 REQUIRES A PERSON RESPONSIBLE FOR PAYI NG ANY SUM TO ANY 6 ITA NO. 895/JP/2012 A.Y 2007-08. SHRI RAJENDRA YADAV VS. ITO AJMER. RESIDENT WHO IS A CON TRACTOR FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURSUANCE O F A CONTRACT BETWEEN THE CONTRACTOR AND A SPECIFIED PERSON, TO DEDUCT TA X AT THE PRESCRIBED RATES. THE HONBLE SUPREME COURT CONSIDERED THE SC OPE OF SECTION 194C IN THE FOLLOWING 2 CASES. 1.ASOCIATED CEMENT CO. LTD. V. IT(1993) 201 ITR 435 (SC) 2.BIRLA CEMENT WORKS VS. CBDT (20012) 248 ITR 216(S C) IN THE FIRST MENTIONED CASE, IT WAS HELD BY THE APE X COURT THAT A CONTRACT COULD BE A CONTRACTOR FOR SUPPLY OF LABOUR FOR CARR YING OUT ANY WORK. IN THE CASE OF THE APPELLANT ONLY LABOUR CHARGES WERE PAID AS BEING PROCESSING CHARGES SO AS TO MAKE THE GOODS (MARBLE BLOCKS) MARKETABLE BY CONVERTING THE SAME INTO SLABS OR MAKING THEM AS MARBLE TILES AND SINCE THERE WAS NOTHING TO SUGGEST THAT ANY AGREEME NT HAD TAKEN PLACE BETWEEN THE APPELLANT AND THE AFORESAID 3 PARTIES A ND HENCE IT CANNOT BE SAID THAT ANY PAYMENT WAS MADE TO THE CONTRACTOR SO AS TO MAKE THE APPELLANT LIABLE TO DEDUCT INCOME TAX ON PAYMENTS M ADE TO THEM. IT IS ALSO SUBMITTED THAT SECTION 40 WITH CLAUSES ( A)(B) AND(BA) IS SUBJECT TO NON-OBSTANTE CLAUSES WITH WHICH SECTION 40 STAR TS NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION 30 TO 38 HENCE THIS QUALIFICATION WHICH APPLIES FOR ALL CLAUSES U/S 40 APPLIES FOR SECTION 40(A)(IA) AS WELL AS IT IS AN UNDISPUTABLE PROPOSITION AND THEREFORE, THE QUESTIO N OF DENIAL O DEDUCTION FOR FAILURE TO DEDUCT TAX CAN ONLY APPLY IN RESPECT OF THOSE ITEMS FALLING U/S 30 TO 38. IN RESPECT OF OTHER PAYMENTS FOR WHICH T HERE IS SUCH FAILURE. THERE CAN BE OTHER CONSEQUENCES LIKE INTEREST AND P ENALTY BUT NOT DENIAL OF DEDUCTION U/S 40(A)(IA). THE LD. ITO HAS ALSO IMPOSED PENALTY OF RS. 2230/- FOR FAILURE TO DEDUCT TDS VIDE ORDER U/S 201(1) & 201(1A) DATED 28.3.2011 (COPY SUBMITTED). WE HAVE ACCEPTED THIS ORDER AND MADE THE PAYMENTS A LSO, IN VIEW OF THE VERY SPECIFIC OPINION AS MENTIONED IN THE BOOK LAW OF INCOME TAX.(10 TH EDITION) BY SAMPATH IYENGAR IN RESPECT OF OTHER PA YMENTS FOR WHICH THERE IS SUCH FAILURE, THERE CAN BE OTHER CONSEQUEN CE LIKE INTEREST & PENALTY BUT NOT DENIAL OF DEDUCTION U/S 40(A)(IA). 7 ITA NO. 895/JP/2012 A.Y 2007-08. SHRI RAJENDRA YADAV VS. ITO AJMER. 5.2. THE LD. D/R RELIED UPON THE ORDER PASSED BY TH E AUTHORITIES BELOW AND HAS BROUGHT TO OUR NOTICE THE CIRCULAR OF THE BOARD ON THIS ISSUE . WE ARE REPRODUCING HERE THE SAID CIRCULAR FOR THE PURPOSES OF CLARITY :- IT HAS BEEN BROUGHT TO THE NOTICE OF THE BOARD THA T THERE ARE CONFLICTING INTERPRETATIONS BY JUDICIAL AUTHORITIES REGARDING THE APPLICABILITY OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME-TAX ACT, 1961 ('THE ACT') WITH REGARD TO THE AMOUNT NOT DEDUCTIBLE IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PRO FITS AND GAINS OF BUSINESS OR PROFESSION'. 2. SECTION 40(A)(IA) OF THE ACT READS AS UNDER: ' ...ANY INTEREST, COMMISSION OR BROKERAGE, RENT, R OYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT AN Y WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 13 9...': 3. IN THE CASE OF MERILYN SHIPPING & TRANSPORTS V. ADDL. CIT [2012] 20 TAXMANN.COM 244/136 ITD 23 (VISHKHA.), IT WAS HELD BY SPECIAL B ENCH OF ITAT, VISHAKHAPATNAM, THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WOUL D APPLY ONLY TO THE AMOUNT WHICH REMAINED PAYABLE AT THE END OF THE RELEVANT FINANCI AL YEAR AND COULD NOT BE INVOKED TO DISALLOW THE AMOUNT WHICH HAD ACTUALLY BEEN PAID DU RING THE PREVIOUS YEAR WITHOUT DEDUCTION OF TAX AT SOURCE. THE ORDER OF THE SPECIA L BENCH HAS SINCE BEEN PUT UNDER INTERIM SUSPENSION BY THE ANDHRA PRADESH HIGH COURT . 3.1 THE HON'BLE CALCUTTA HIGH COURT AND HON'BLE GUJ ARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX, KOLKATA-XI V. CRESCENT EXPORT SYNDICATE [2013] 33 TAXMANN.COM 250/216 TAXMAN 258 AND CIT-IV V. SIKAND ARKHAN N TUNVAR [2013] 33 TAXMANN.COM 133/[2014] 220 TAXMAN 256 (GUJARAT) RES PECTIVELY, HAVE HELD THAT SECTION 40(A)(IA) OF THE ACT WOULD COVER NOT ONLY THE AMOUN TS WHICH ARE PAYABLE AT THE END OF THE PREVIOUS YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIM E DURING THE YEAR. 3.2 THE HON'BLE HIGH COURTS HAVE FURTHER HELD THAT THE INTENTION OF THE LEGISLATION WAS TO DISALLOW CERTAIN TYPES OF EXPENSE, SUBJECT TO PROVI SIONS OF CHAPTER XVII-B, WHICH IS PAYABLE AT ANY TIME DURING THE YEAR BUT NO TAX WAS DEDUCTED AT SOURCE OR IF DEDUCTED WAS NOT PAID WITHIN THE STIPULATED TIME. THERE IS NO SU CH CONDITION THAT AMOUNT SHOULD REMAIN PAYABLE AT THE END OF THE YEAR. 3.3 THE HON'BLE ALLAHABAD HIGH COURT IN CIT V. VECT OR SHIPPING SERVICE (P.) LTD. [2013] 38 TAXMANN.COM 77/218 TAXMAN 93 (MAG.) (ALLAHABAD) HAS AFFIRMED THE DECISION OF THE SPECIAL BENCH IN MERILYN SHIPPING THAT FOR DISALLOW ANCE UNDER SECTION 40(A)(IA) OF THE ACT, THE AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID DURING THE YEAR. HOWEVER, THE DECISIONS OF THE HON'BLE GUJARAT AND C ALCUTTA HIGH COURTS (SUPRA) WERE NOT BROUGHT TO THE ATTENTION OF THE HON'BLE ALLAHAB AD HIGH COURT. 8 ITA NO. 895/JP/2012 A.Y 2007-08. SHRI RAJENDRA YADAV VS. ITO AJMER. 3.4 IN THE CASE OF ACIT, CIRCLE 4(2), MUMBAI V. RIS HTI STOCK AND SHARES PVT. LTD. IN ITA NO. 112/MUM/2012, HON'BLE ITAT, MUMBAI IN ITS ORDER DATED 2-8-2013 HAS EXAMINED THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT (SUPRA ) AS REGARDS TO SECTION 40(A)(IA) OF THE ACT AND CONCLUDED THAT THE SAME WAS AN 'ORBITER DICTA' WHILE THE DECISIONS OF THE HON'BLE GUJARAT AND CALCUTTA HIGH COURT (SUPRA) WER E 'RATIO DECIDENDI'. THE ITAT ACCORDINGLY APPLIED THE VIEW TAKEN BY THE HON'BLE G UJARAT AND CALCUTTA HIGH COURT AS RATIO DECIDENDI PREVAILS OVER AN ORBITER DICTA. 4. AFTER CAREFUL EXAMINATION OF THE ISSUE, THE BOAR D IS OF THE CONSIDERED VIEW THAT THE PROVISION OF SECTION 40(A)(IA) OF THE ACT WOULD COV ER NOT ONLY THE AMOUNTS WHICH ARE PAYABLE AS ON 31ST MARCH OF A PREVIOUS YEAR BUT ALS O AMOUNTS WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. THE STATUTORY PROVISIONS ARE AMPLY CLEAR AND IN THE CONTEXT OF SECTION 40(A)(IA) OF THE ACT THE TERM 'PAYABLE' WOU LD INCLUDE 'AMOUNTS WHICH ARE PAID DURING THE PREVIOUS YEAR'. 5. WHERE ANY HIGH COURT DECIDES AN ISSUE CONTRARY TO T HE 'DEPARTMENTAL VIEW', THE 'DEPARTMENTAL VIEW' THEREON SHALL NOT BE OPERATIVE IN THE AREA FALLING IN THE JURISDICTION OF THE RELEVANT HIGH COURT. HOWEVER, THE CCIT CONCERNE D SHOULD IMMEDIATELY BRING THE JUDGMENT TO THE NOTICE OF THE CTC. THE CTC SHALL EX AMINE THE SAID JUDGMENT ON PRIORITY TO DECIDE AS TO WHETHER FILING OF SLP TO THE SUPREM E COURT WILL BE ADEQUATE RESPONSE FOR THE TIME BEING OR SOME LEGISLATIVE AMENDMENT IS CAL LED FOR. - CIRCULAR NO.10, DATED 16- 12-2013. 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS AN ADMITTED FACT THAT THE APPELLANT CARRIED ON T HE BUSINESS OF TRADING OF MARBLE TILES AND SLAB. IT IS ALSO AN ADMITTED FACT THAT THE MARB LE BLOCKS ARE PURCHASED BY THE ASSESSEE AND THE SAME MARBLE BLOCKS ARE SENT TO M/S . GARVIT STONEX, M/S. CHANDA MARBLES & M/S. NIDHI GRANITES FOR THE PURPOSE OF SA WING AND EDGE CUTTING WITH A VIEW TO CONVERT THE MARBLE BLOCKS INTO MARBLE TILES. IN THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE HAS PAID A SUM OF RS 1, 54,711/- TO M/S. M/S. GARVIT STONEX, RS. 3,92,711/- TO M/S. CHANDA MARBLES & RS. 2,28,70 0/- TO M/S. NIDHI GRANITES TOTALING RS. 7,76,122/- FOR EDGE CUTTING AND SAWING CHARGES ON VARIOUS DATES. FROM THE DETAILS GIVEN, THE AO AND THE LD. CIT (A) HAS WORKED OUT TH E AVERAGE CUTTING AND SAWING CHARGES OF MORE THAN RS. 2155/- PER DAY PAID TO THE SAID M/S. GARVIT STONEX, M/S. 9 ITA NO. 895/JP/2012 A.Y 2007-08. SHRI RAJENDRA YADAV VS. ITO AJMER. CHANDA MARBLES & M/S. NIDHI GRANITES. IN OUR VIEW, THE SAID FIRMS/COMPANIES ARE DOING THE EDGE CUTTING AND SAWING ON REGULAR BASIS AND AR E ALSO HAVING BUSINESS RELATIONSHIP WITH THE ASSESSEE. THE REGULAR BILLS WERE BEING RA ISED BY THE SAID CONCERNED PERSONS ON THE ASSESSEE AND THE ASSESSEE HAD BEEN MAKING TH E PAYMENT TO THE SAID PERSONS. WE DO NOT AGREE WITH THE CONTENTION OF THE ASSESSEE THAT THERE IS NO WRITTEN CONTRACT OR ORAL CONTRACT WITH THE SAID PERSONS/FIRMS WHICH MAK E THE PAYMENT AMENABLE FOR DEDUCTION OF TDS UNDER SECTION 194C OF THE IT ACT. WE DO NOT FIND FORCE IN THE SUBMISSIONS, AS PER OUR UNDERSTANDING, UNDER THE CO NTRACT AT EVERY PROMISE AND EVERY SET OF PROMISES ARE FORMED. THE CONSIDERATION FOR EACH OTHER IS AN AGREEMENT AND AN AGREEMENT ENFORCEABLE BY LAW IS A CONTRACT. IN THE PRESENT CASE, THE CONTRACT STANDS CONCLUDED WHEN THE ASSESSEE ASKED M/S. GARVIT STONE X AND OTHERS TO DO THE EDGE CUTTING AND SAWING OF GRANITE BLOCKS AND CONVERT TH EM INTO MARBLE TILES FOR IT FOR A CONSIDERATION. THE MOMENT THE SAID CONTRACTORS/PERS ONS DOING THE SAWING AND EDGE CUTTING OF THE MARBLE BLOCKS, THE SAID PERSONS ARE ENTITLED FOR THE AMOUNT REQUIRED TO BE PAID AS PER THE BILLS RAISE BY THEM. IN FACT, IN TH E PRESENT CASE AFTER DOING THE EDGE CUTTING AND SAWING, THE CHARGES WERE EVEN PAID BY T HE ASSESSEE, IN OUR UNDERSTANDING, A CONTRACT HAS COME INTO EXISTENCE BETWEEN THE ASSE SSEE AND M/S. GARVIT STONEX AND OTHERS. IN OUR VIEW, THE ASSESSEE IS RESPONSIBLE F OR PAYING THE AMOUNT TO SUCH PERSONS I.E. CONTRACTOR FOR CARRYING OUT THE SPECIFIC WORK. THEREFORE, THE ASSESSEE IS LIABLE TO DEDUCT THE TAX ON SUCH PAYMENTS. SINCE THE ASSESSE E HAS FAILED TO DEDUCT THE TAX ON THE AMOUNT PAID BY IT TO SUCH PERSONS/CONTRACTOR, T HE ASSESSEE IS DUTY BOUND TO DEDUCT 10 ITA NO. 895/JP/2012 A.Y 2007-08. SHRI RAJENDRA YADAV VS. ITO AJMER. THE TAX, AND NON DEDUCTION OF TAX BY THE ASSESSEE, ATTRACTS THE PROVISIONS OF SECTION 40(A)(IA). 6.1. RECENTLY IN THE MATTER OF P.M.S. DIESELS 2015 ] 59 TAXMANN.COM 100 (PUNJAB & HARYANA), HONBLE PUNJAB & HARYANA HIGH COURT HAD ELABORATELY DISCUSSED THE JUDGMENT PASSED BY THE HONBLE CALCUTTA HIGH CO URT AND HONBLE GUJARAT HIGH COURT, HONBLE ALLAHABAD HIGH COURT AND OTHER JUDGM ENTS AS AVAILABLE AND THEREAFTER HAS COME TO THE CONCLUSION THAT THE PROVISIONS OF S ECTION 40(A)(IA) ARE MANDATORY IN NATURE AND NON COMPLIANCE/NON DEDUCTION OF TAX ATTR ACTS DISALLOWANCE OF THE ENTIRE AMOUNT. HAVING SAID SO, WE WILL BE FAILING IN OUR DUTY IF WE DO NOT DISCUSS THE AMENDMENT BROUGHT IN BY THE FINANCE (NO. 2) ACT 201 4 WITH EFFECT FROM 1.4.2015 BY VIRTUE OF WHICH PROVISO TO SECTION 40(A)(IA) HAS BE EN INSERTED, WHICH PROVIDES THAT IF ANY SUCH SUM TAXED HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR HAS BEEN DEDUCTED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DAT E SPECIFIED IN SUB-SECTION (1) OF SECTION 139, SUCH SUM SHALL BE ALLOWED AS A DEDUCTI ON IN COMPUTING THE INCOME OF PREVIOUS YEAR, AND FURTHER, SECTION 40(A)(IA) HAS B EEN SUBSTITUTED WHEREIN THE 30% OF ANY SUM PAYABLE TO A RESIDENT HAS BEEN SUBSTITUTED. IN THE PRESENT CASE, THE AUTHORITIES BELOW HAS ADDED THE ENTIRE SUM OF RS. 7,51,322/- BY DISALLOWING THE WHOLE OF THE AMOUNT. THOUGH THE SUBSTITUTION IN SECTION 40 HAS B EEN MADE EFFECTIVE WITH EFFECTIVE FROM 1.4.2015, IN OUR VIEW THE BENEFIT OF THE AMEND MENT SHOULD BE GIVEN TO THE ASSESSEE EITHER BY DIRECTING THE AO TO CONFIRM FROM THE CONTRACTORS, NAMELY, M/S. GARVIT STONEX, M/S. CHANDA MARBLES AND M/S. NIDHI GRANITES AS TO WHETHER THE SAID PARTIES HAVE DEPOSITED THE TAX OR NOT AND FURTHER OR RESTRI CT THE ADDITION TO 30% OF RS. 11 ITA NO. 895/JP/2012 A.Y 2007-08. SHRI RAJENDRA YADAV VS. ITO AJMER. 7,51,322/-. IN OUR VIEW, IT WILL BE TIED OF JUSTIC E IF THE DISALLOWANCE IS ONLY RESTRICTED TO 30% OF RS. 7,51,322/-. ACCORDINGLY, THE APPEAL OF T HE ASSESSEE IS PARTLY ALLOWED IN THE ABOVE SAID MANNER. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/01/2016 . SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 29 /01/2016 DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI RAJENDRA YADAV, KISHANGARH. 2. IZR;FKHZ@ THE RESPONDENT- THE ITO WARD 1(3), AJMER. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 895/JP/2012) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 12 ITA NO. 895/JP/2012 A.Y 2007-08. SHRI RAJENDRA YADAV VS. ITO AJMER.