TaxTMI 
TaxTMI 
2016 (3) TMI 651
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....he assessment order, in W.P.No.31748 of 2015, are alone noted. The assessment order dated 26.02.2015, passed in respect of M/s.IVRCL-KBL (JV) for the assessment year 2012-13, records that the assessee was a joint-venture executing civil contract works; they had filed their return of income, for the assessment year 2012-13, electronically declaring their total income as Rs.'Nil'; they had claimed refund of Rs. 23,39,240/-; their case was selected for scrutiny, and subsequently a notice under Section 143(2) of the Income Tax Act, 1961 (for short "the Act") was issued and served on the assessee; later a notice under Section 142(1) of the Act was issued along with a questionnaire; in response thereto, the authorized representative of the assessee appeared and furnished the information; the assessee-JV was awarded contracts by the Irrigation Department of the Government of Andhra Pradesh; later these contracts were given by the assessee on sub-contract, to one of its constituents, on a back to back basis without any margin; during the assessment year under consideration, the assessee had declared gross receipts of Rs. 1,07,55,16,904/-, and the same was passed on to the subcontractor; a....
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....nclude a challenge to the assessment orders whereby the petitioners were denied the benefit of TDS credit in terms of Rule 37BA(2)(i) of the Rules. Sri S.Ravi, learned Senior Counsel appearing on behalf of the petitioners, would submit that the petitioners had entered into agreements with the Government of Andhra Pradesh for execution of works relating to irrigation projects; they had, in turn, entered into agreements with one of their constituents for execution of the work; both the agreements were independent of each other; the Government was not a party to the agreement between the petitioner-JV and its constituent; likewise the constituent was not a party to the agreement between the Government and the petitioner; distinct and independent obligations arose under both the contracts; the Government of Andhra Pradesh was entitled to hold the petitioner alone responsible either for non-completion or for delay or for improper execution of the work; the Government had deducted tax at source, from the bills payable to the petitioner, at 1%/2% as stipulated in Section 194C of the Act; the petitioner had also deducted TDS, at the very same rates, while making payment to the subcontract....
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....3) of the Act which enables the CBDT, for the purposes of giving credit in respect of the tax deducted in terms of the provisions of Chapter XVII of the Act, to make such rules as may be necessary, including Rules for the purposes of giving credit to a person other than those referred to in Sections 199(1) &(2) of the Act, as also the assessment order for which such credit may be given. The power conferred on the CBDT, under Section 199(3) of the Act, is to make rules for the purpose of giving credit to a person, other than the person from whose amounts tax is deducted at source. It is, therefore, necessary to examine whether or not the Rules made by the CBDT in this regard justify refusal by the assessing authority to give credit, of the tax deducted by the Government from their bills, to the petitioners herein. While examining the applicability of the Rules, it must be borne in mind that the Rules made by the CBDT, in the exercise of the powers conferred under Section 199(3) of the Act, must be read harmoniously with all the clauses of Section199 and the other provisions of the Act. It is settled law that Rules, made under the Act, should be interpreted in conformity with the pr....
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....ts paid by them to the sub-contractors. Section 199 of the Act relates to Credit for tax deducted and, under subsection (1) thereof, any deduction made in accordance with the foregoing provisions of Chapter XVII, and paid to the Central Government, shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor or of the owner of the property or of the unit-holder, or of the shareholder, as the case may be. In the present case, deduction of TDS by the Government of Andhra Pradesh was on behalf of the petitioner, for it is from their income that tax was deducted at source. Section 199(1) of the Act, in the present case, refers to the petitioners alone, and not their constituent i.e the sub-contractors. While Sri T.Vinod Kumar, learned Senior Standing Counsel for Income Tax, would place emphasis on the words "the person from whose income", in Section 199(1) of the Act, to contend that the said person is the subcontractor and not the petitioner, that would require this Court to ignore the subsequent words "from whose income the deduction was made". In the present case, the deductions were mad....
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....ion of persons, or in the hands of trustees, as the case may be; (c) the income from an asset held in the name of a deductee, being a partner of a firm of a karta of a Hindu undivided family, is assessable as the income of the firm, or Hindu undivided family, as the case may be; (d) the income from a property, deposit, security, unit or share held in the name of a deductee is owned jointly by the deductee and other persons and the income is assessable in their hands in the same proportion as their ownership of the asset; Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax referred to in sub-rule (1) After its amendment w.e.f. 01.11.2011, Rule 37BA (2) (i) reads thus:- (2) (i) Where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, shall be given to the other person and not to the deductee : Provided that the deductee files a declarat....
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....ns that there is no privity of contract between the Government and the constituent of the JV i.e the subcontractor. The rights and obligations under the first contract are only that of the Government and the petitioner; and those, in the second contract, are only that of the petitioner and the sub-contractor. The contractual obligation, to execute the work for the Government, is that of the joint venture alone, and not that of the constituent member of the JV i.e the sub-contractor. Any action which the Government of Andhra Pradesh could have taken, for breach of the terms and conditions of the first contract, was only against the petitioner JV and not its constituent. While the sub-contractor, no doubt, executed the work, they did so in terms of the second contract entered into between them and the petitioner-JV. It is evident, therefore, that the contractual receipts under the first contract is only that of the petitioner; and the income, arising out of the said contract, is assessable only in their hands, and not in the hands of the subcontractor. The sub-contractor is assessable to tax on their income earned out the amounts received by them from the petitioner in terms of the s....
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....sildar Singh v. State of U.P., 1959 Supp (2) SCR 875; Dwarka Prasad v. Dwarka Das Saraf (1976) 1 SCC 128; Commissioner of Income-tax, Kerala and Coimbatore v. P. Krishna Warriar AIR 1965 SC 59 Maxwell on Interpretation of Statutes, 10th Edn., p. 162). A proviso cannot be torn apart from the main Section/Rule nor can it be used to nullify or set at naught the real object of the main Section. (S. Sundaram Pillai v. V.R. Pattabiraman (1985) 1 SCC 591; Craies in his book Statute Law (7th Edn.) It is a fundamental rule of construction that a proviso must be considered in relation to the principal matter to which it stands as a proviso. It is to be construed harmoniously with the main enactment. (Abdul Jabar Butt v. State of Jammu & Kashmir AIR 1957 SC 281; Indo-Mercantile Bank Ltd.,1959 Supp (2) SCR 256; Ram Narain Sons Ltd. (1955) 2 SCR 483 and State of Punjab v. Kailash Nath (1989) 1 SCC 321). The proviso to Rule 37BA (2)(i) requires the deductee to file a declaration with the deductor, and for the deductor to report the tax deduction, in the name of the other person, in the information relating to deduction of tax referred to in sub-rule (1). In cases where the income is assess....
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....; it applies to pending proceedings also; where a new procedure is prescribed by law, it governs all pending cases; alterations, in the name of procedure, are always retrospective unless there is some good reason why they should not be; and the amendment to Rule 37BA, as introduced by the Income Tax (8th Amendment) Rules, 2011, being procedural in nature, would have retrospective effect. As it would make no difference to the case on hand, whether the pre-amended or the amended Clause 2(i) of Rule 37BA of the Rules is applied, we shall proceed on the premise that the amended Clause 2(i) of Rule 37BA is alone applicable. The amended Clause 2(i) of Rule 37BA starts with the words "Where under any provisions of the Act". It is only where a specific provision in the Act stipulates that the tax deducted at source is assessable in the hands of a person, other than the deductee, is credit for the whole, or any part, of the tax deducted at source required to be given to the other person, and not to the deductee. We have not been shown any such provision in the Act which requires the whole, or any part of the income, on which tax is deducted at source from the bills of the petitioner-JV, to ....
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....radiction, submit that the issue before the ITAT was regarding the person in whose hands the income was to be subjected to tax, and the question as to who was entitled to be given credit, for the tax deducted at source, did not arise for consideration therein. Learned Senior Counsel would point out that, in the appeal before the ITAT, the joint-venture was sought to be assessed to tax on an estimation of their profits, though the constituent sub-contractor had also been assessed to tax. On the other hand Sri T.Vinod Kumar, learned Senior Standing Counsel for Income Tax, would submit that their contention to the contrary before the ITAT notwithstanding, the assessing authority, in the present cases, had merely followed the order of the ITAT in the appeal relating to an earlier assessment year. This submission of the learned Senior Standing Counsel for Income Tax does not merit acceptance as the assessment orders, in the present batch of writ petitions, make no reference to the order of the ITAT. As the order of the ITAT, for the assessment year 2008-09, has attained finality, it would be wholly inappropriate for us to re-appreciate the findings recorded therein or examine the valid....