TaxTMI 
TaxTMI 
2021 (4) TMI 1049
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....workmen for the said year. In terms thereof, the Assessee could claim a deduction of additional amounts paid to new regular workmen employed in the previous year on the workmen satisfying the definition under Section 2(s) of the Industrial Disputes Act, 1947. 3. The Assessee had also sought for deduction in computing the income chargeable under the head "profits and gains of business or profession", as regards the amounts paid towards lease rental on lease finance of cars obtained by the Assessee and had contended that there was no tax liability to be paid thereof nor any deduction at source required to be done thereon since the same is not covered under Section 194-C or under Section 194-I of the Income Tax Act. 4. The Assessing Officer vide final order dated 25.01.2012 had held that the Assessee was not eligible for any deduction under Section 80JJ(AA) of the Act. The Assessing Officer also held that since the Assessee had not deducted tax at source on the lease rentals for the cars/vehicles in terms of Section 194-C of the Act, the expenditure claimed in the computation of income was disallowed and added back to the total income of the Assessee under Section 40(a)(ia) on the g....
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....o the Financial Year [FY] and coming to a conclusion that for the previous FY 2006-07 and new employees who joined FY 2006-07 and continued in employment FY 2007-08 and completed 300 days of work in the said year, the Appellate Tribunal considering that Section 80JJ(AA) was amended by the Finance Act 2018 w.e.f. 1.4.2019 came to a conclusion that the said amendment was a curative and clarificatory amendment, and as such, the continuance of employment in the two financial years for over 300 days was sufficient enough to claim deduction under Section 80JJ(AA). 9. As regards the appeal filed by the Revenue, the Tribunal upheld the decision of the CITA and held that the provisions of Section 194-C would not apply for lease rentals of vehicles. It is aggrieved by the said order of the Tribunal that the Revenue is before this Court challenging the order of the Tribunal passed in IT(TP)A No.169/Bang/2014 dated 6.3.2020 for the Assessment Year 2008-09 and seeking to confirm the order of the CITA confirming the order passed by the Additional Commissioner of Income-tax, LTU, Bangalore. The Revenue has also preferred ITA No. 141/2020 challenging the order of the Tribunal passed in IT(TP)A No....
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....ontends that exemption provisions under the Income Tax Act have to be strictly construed and have to be strictly complied with by the Assessee to claim any benefit. 11.2. Workmen as regards whom the deduction is sought for not having worked for 300 days during the previous year, the Assessee was not eligible to claim for any exemption and/or deduction; 11.3. The Tribunal has grossly erred in relying on the amendment of the year 2019 and has claimed said amendment is applicable to the assessment year 2008-09; 11.4. The aforesaid amendment is not a curative amendment or clarificatory amendment. 11.5. That in the interregnum between 2008-09 and 2019, there was one more amendment which had taken place in the year 2014, therefore amendment to the amendment which happened in the year 2014 cannot be said to be a curative or clarificatory amendment to a provision applicable to the present case for the assessment year 2008-2009. In this regard, he relies upon the following decisions: 11.6. He submits that a financial statute has to be strictly interpreted. Since the Assessee does not satisfy the requirement of a statute, the Assessee cannot claim any benefit therefrom. In this regard, ....
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....their obligations. Therefore, the Assessee hired vehicles from the owners of the vehicles. There is no written agreement entered into between the assessee and such individual owners. It is those vehicles hired in the aforesaid manner which are utilized for performing the contract entered into between the Assessee and its customers. In the absence of any material placed by the Assessee, the only inference that can be drawn from the facts of this case is that the Assessee has utililsed the vehicles taken on lease to perform the written contract entered into between the Assessee and various customers. Out of the transportation charges received under the aforesaid written contract, a substantial portion has been paid to the various owners of the vehicles towards transportation charges. Though a ground is taken that such payment is not in excess of Rs. 20,000 and, therefore, there is no obligation to deduct TDS, the material on record discloses that total amount paid towards transportation charges is roughly about Rs. 79,45,225. In the absence of any particulars, it cannot be said that there was no liability to deduct tax on that score. Law does not stipulate the existence of a written ....
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....SC) 15.1. The nature of contract entered into by the appellant with the consignor company makes it clear that the appellant was to transport the goods (cement) of the consignor company; and in order to execute this contract, the appellant hired the transport vehicles, namely, the trucks from different operators/owners. The appellant received freight charges from the consignor company, who indeed deducted tax at source while making such payment to the appellant. Thereafter, the appellant paid the charges to the persons whose vehicles were hired for the purpose of the said work of transportation of goods. Thus, the goods in question were transported through the trucks employed by the appellant but, there was no privity of contract between the truck operators/owners and the said consignor company. Indisputably, it was the responsibility of the appellant to transport the goods (cement) of the company; and how to accomplish this task of transportation was a matter exclusively within the domain of the appellant. Hence, hiring the services of truck operators/owners for this purpose could have only been under a contract between the appellant and the said truck operators/owners. Whether suc....
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....year even if such work men was employed in the preceding year for more than 300 days but in the present year, such work men was not employed for 300 days or more. In this view of the matter, we find no infirmity in the order of the ld.CIT(A) on this issue. 12.1.2. Texas Instrument (India) P. ltd. (Asst. Year 2007-2008) 4.1 According to section 80JJAA, the deduction is available in three yearly installments, on the additional wages paid to the new regular workmen employed by the Assessee in the previous year. In other words, the deduction has to be claimed beginning form the year in which the workmen wre first employed. The audit report in Form 10DA says in Note No.2 that the workmen who worked for less than 300 days in the previous year (relevant to the current assessment year) but continued with the company till the end of the year have also been considered for the purposes of deduction as per legal opinion obtained by the company. This stand taken by the Assessee is also not acceptable. Explanation (ii)(c) to the section, while defining the term' regular workmen', excludes those who are employed for a period of less than 300 days during the previous year form this defini....
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....loyed for doing whole-time job is a workman and the one employed on temporary, part-time or contract basis on fixed wages or as a casual employee or for doing duty for fixed hours is not a workman. 14. Whenever an employer challenges the maintainability of industrial dispute on the ground that the employee is not a workman within the meaning of Section 2(s) of the Act, what the Labour Court/Industrial Tribunal is required to consider is whether the person is employed in an industry for hire or reward for doing manual, unskilled, skilled, operational, technical or clerical work in an industry. Once the test of employment for hire or reward for doing the specified type of work is satisfied, the employee would fall within the definition of "workman". 12.5. As regards tax deduction at source, there is no service that has been provided by a leasing company except for the said company having purchased the car and made available the car for use by the Assessee and/or its employees. It is the Assessee and its employees who take care of repair and maintenance of the said car; apart from handing over possession of the vehicle in question, the lease financing company does not render any ....
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....ose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of 'Interpretation of Statutes'. Vis-à-vis ordinary prose, a legislation differs in its provenance, lay-out and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof. 31. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of ....
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....a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra & Ors. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are confronted with any such situation here. 12.6.3. Deputy Commissioner of Income Tax, Circle 11(1), Bangalore vs. ACE Multi Axes Systems Ltd., (2017) 88 taxmann.com 69 (SC) 11. As already noted, the question for consideration is whether deduction under Clause 3 for 10 consecutive assessment years remains permissible irrespective of compliance of conditions subject to which the said deduction is permitted in the relevant assessment years. For purposes of deduction, the industrial undertakings covered by Section 80 IB are of different categories. Under the second proviso to Clause 2, disqualification applicable to industrial undertaking, other than small scale industrial undertakings, i.e., not being in 8th Schedule is not applicable. The small scale industrial undertakings eligible are only those which begin manufacture or prod....
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....erit in these civil appeals filed by the Department for the following reasons: firstly, as stated above, Section 43- B [main section], which stood inserted by Finance Act, 1983, with effect from 1st April, 1984, expressly commences with a non-obstante clause, the underlying object being to disallow deductions claimed merely by making a Book entry based on Merchantile System of Accounting. At the same time, Section 43-B [main section] made it mandatory for the Department to grant deduction in computing the income under Section 28 in the year in which tax, duty, cess, etc., is actually paid. However, Parliament took cognizance of the fact that accounting year of a company did not always tally with the due dates under the Provident Fund Act, Municipal Corporation Act [octroi] and other Tax laws. Therefore, by way of first proviso, an incentive/relaxation was sought to be given in respect of tax, duty, cess or fee by explicitly stating that if such tax, duty, cess or fee is paid before the date of filing of the Return under the Income Tax Act [due date], the Assessee (s) then would be entitled to deduction. However, this relaxation/incentive was restricted only to tax, duty, cess and f....
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....Motors (P) Limited (supra). This Court, in Allied Motors (P) Limited (supra) held that when a proviso is inserted to remedy unintended consequences and to make the section workable, a proviso which supplies an obvious omission in the section and which proviso is required to be read into the section to give the section a reasonable interpretation, it could be read retrospective in operation, particularly to give effect to the section as a whole. Accordingly, this Court, in Allied Motors (P) Limited (supra), held that the first proviso was curative in nature, hence, retrospective in operation with effect from 1st April, 1988. It is important to note once again that, by Finance Act, 2003, not only the second proviso is deleted but even the first proviso is sought to be amended by bringing about an uniformity in tax, duty, cess and fee on the one hand vis-a-vis contributions to welfare funds of employee(s) on the other. This is one more reason why we hold that the Finance Act, 2003, is retrospective in operation. Moreover, the judgement in Allied Motors (P) Limited (supra) is delivered by a Bench of three learned Judges, which is binding on us. Accordingly, we hold that Finance Act, 20....
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....n (2), be allowed a deduction of an amount equal to thirty per cent of additional wages paid to the new regular workmen employed by the Assessee in the previous year for three assessment years including the Assessment year relevant to the previous year in which such employment is provided. (2) No deduction under sub-section (1) shall be allowed,-- (a) if the industrial undertaking is formed by splitting up or reconstruction of an existing undertaking or amalgamation with another industrial undertaking; (b) unless the Assessee furnishes along with the return of income the report of the accountant, as defined in the Explanation below sub-section (2) of section 288 giving such particulars in the report as may be prescribed. Explanation:- For the purpose of this section, the expressions,- (i) "additional wages" means the wages paid to the new regular workmen in excess of one hundred workmen employed during the previous year: Provided that in the case of an existing undertaking, the additional wages shall be nil if the increase in the number of regular workmen employed during the year us less than ten percent of existing number of workmen employed in such undertaking as on t....
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.... in the first year of a new business, emoluments paid or payable to employees employed during that previous year shall be deemed to be the additional employee cost; (ii) "additional employee" means an employee who has been employed during the previous year and whose employment has the effect of increasing the total number of employees employed by the employer as on the last day of the preceding year, but does not include-- (a) an employee whose total emoluments are more than twenty-five thousand rupees per month; or (b) an employee for whom the entire contribution is paid by the Government under the Employees' Pension Scheme notified in accordance with the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952); or (c) an employee employed for a period of less than two hundred and forty days during the previous year; or (d) an employee who does not participate in the recognised provident fund: Provided that in the case of an assessee who is engaged in the business of manufacturing of apparel, the provisions of sub-clause () shall have effect as if for the words "two hundred and forty days", the words "one hundred and fift....
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.... Hindu undivided family) responsible for paying any sum to any resident (hereafter in this section referred to as the sub-contractor) in pursuance of a contract with he sub-contractor for carrying out, or for the supply of labour for carrying out, the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labour which the contractor has undertaken to supply shall, at the time of credit of such sum to the account of the sub-contractor or at the time of payment thereof n cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax on income comprised therein: Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed 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 sum is credited or paid to the account of sub- contractor, shall be liable to deduct income-tax under this sub-section. (3) No deduction shall be made under sub-section (1) or su....
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....any work) undertaken by the contractor for the co-operative society. (ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice. (4) No individual or Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family. (5) No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if such sum does not exceed thirty thousand rupees : Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds one lakh rupees, the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income-tax under this section. (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, where such contra....
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....er separately or together) any,-- (a) land; or (b) building (including factory building); or (c) land appurtenant to a building (including factory building); or (d) machinery; or (e) plant; or (f) equipment; or (g) furniture; or (h) fittings, whether or not any or all of the above are owned by the payee; (ii) where any income is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. 15. We answer the substantial questions as under: 16. Answer to Substantial Question No.1: Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowance of Rs. 7,57,22,069 made under section 80JJAA of the Act by holding that the employees in software industry are covered by definition of 'Workman' in Explanation (iii) to section 80JJAA of the Act read with section 2(s) of the Industrial Dispute Act and employees who have worked for 300 days in a previous are eligible for the purpo....
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....nection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person- (i) who is subject to the Air Force Act, 1950 (45 of 1950), or the Army Act, 1950 (46 of 1950), or the Navy Act, 1957 (62 of 1957); or (ii) who is employed in the police service or as an officer or other employee of a prison, or (iii) who is employed mainly in a managerial or administrative capacity; or (iv) who, being employed in a supervisory capacity, draws wages exceeding one thousand six hundred rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature. 16.4. In terms of section 2(s) of the ID Act, the definition of a workman is very wide inasmuch as the said definition would cover any person who has the technical knowledge, self skilled in an industry. It cannot be disputed that the Assessee's business is an industry. It also cannot be disputed that the employees of the Assessee are technical persons skilled in software development and, as such, engaged by the Assessee to render services in th....
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....eria as required under the various provisions under Chapter-VI-A. The incentive of the deduction provided under Section 80JJ-AA is with an intention to encourage the Assessee to employ more and more people, provide employment and, in lieu thereof, permit the employer/assessee to deduct certain amounts from the income when the returns are filed. It is with this object, purport and intent of section 80JJ-AA of the Act that the present facts and circumstances would have to be considered. It is also required for the Assessing Officer, CITA, Income-tax Appellate Tribunal, as also any other officer to always interpret and or apply the provisions of the Act, taking into consideration the intent and purport of the said provision. 16.9. The meaning or interpretation now sought to be given by Sri. Aravind, learned Senior Panel counsel is that only if the employee were employed for a period of 300 days in a particular financial year, only then deductions could be claimed, if not the deductions could not be claimed even though such employee has been employed for 300 continuous days or more. 16.10. We would disagree with the said contention. What is required is for a person to be employed fo....
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....ission of Sri. K.V.Aravind is accepted, then no employer/assessee would be able to fulfil the requirement of employing its labour/assessee prior to 5th June of that assessment year so as to claim the benefit of Section 80JJ-AA. Such a narrow and pedantic approach is impermissible. It also being on account of the fact that Section 80JJ-AA relating to deductions under Chapter is an incentive and, therefore, has to be read liberally. In this aspect, we are also supported by the decision of the Apex Court in Mavilayi Service co-operative Bank Ltd's case (supra), wherein the Apex Court has held that a benevolent provision has to be read liberally and reasonably and if there is an ambiguity in favour of the Assessee. 16.14. The Apex Court in the case Vatika Township (P.) Ltd. (supra) has also held similarly, in that if there is a benefit conferred by legislation, the said benefit being legislative's object, there would be a presumption that such a legislation would operate with retrospective effect by giving a purposive construction. Thus the clarificatory amendment of the year 2018 can also be said to apply retrospectively for the benefit of the Assessee even though the Revenue....
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.... does not invalidate disallowance if the order passed in sum and substance meets the legal requirements then it is said to be a valid order and appellate authorities has power to either enhance or reduce tax liability?". 17.1. Both the questions being inter-related to each other are answered together. These questions arise specifically out of ITA No.151/2020 and are not germane to ITA No.141/2020. As stated supra, the Assessee had taken on lease financing various motor vehicles, which are given to the employees of the Assessee. The Assessing Officer had disallowed the deduction sought for by the Assessee towards the payment made to the lease financing company on the ground that there had been no tax deduction at source by the Assessee under Section 194-C or under Section 194-I of the Act. On a challenge being made by the Assessee, the CIT(A) accepted the contentions of the Assessee and held that Section 194-C was inapplicable to such a transaction and on an appeal the Revenue to the Tribunal, the Tribunal upheld the order of the CIT(A), and it is aggrieved by the said order, the present appeals have been filed. 17.2. The contention of Sri. Aravind is that the Assessee ought to ha....