TaxTMI 
TaxTMI 
2021 (5) TMI 890
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....subject, the learned Assessing Officer erred in disallowing interest expense amounting to Rs. 10,12,346/- and Job work expenses of Rs. 1,46,718/- u/s.40(a)(ia) of the Act without considering the facts of the case favorably. [3] On the facts and in the circumstances of the case, as well as law on the subject, the Honorable CIT (A)-2, Surat erred in confirming the addition made by the A.O. without considering the facts of the case favorably. Your appellant therefore prays that looking to the facts and circumstances of the case, the addition made by the A.O. to the tune of Rs. 11,59,064/- is required to be deleted." Your appellant further reserves his right to add; alter or to amend any of the aforesaid grounds at the time of hearing of an appeal." 2. Although in this appeal the assessee has raised multiple grounds of appeal, as noted above, but at the time of hearing, the solitary grievance of the assessee has been confined to the issue that since the assessee has filed return of income under section 44AD 'Special provision for computing profits and gains of business on presumptive basis' and declared the profit more than @ 8% as per the provisions of la....
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....r analysis): "During the year under assessment, the assessee was engaged in the business of manufacturing & sale of Art silk grey fabrics and the return of income was filed u/s 44AD of I. Tax Act, 1961 on presumptive taxation basis showing Net profit @ 8.10% of total turnover i.e. (7,48,274/- / 92,33,844/-) which is evident from the return of income filed and records available with your honour vide earlier submissions. Sir, for your ready reference the provision of section 44AD of the Income Tax Act, 1961 is reproduced hereunder. 2. Sec.44AD.(1) - (Special provision for computing profits and gains of business on presumptive basis). "Notwithstanding anything to the contrary contained in sections 28 to 43C. in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or pro....
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....ritten submissions of the ld Counsel and noted that the sum and substance of his arguments and written submissions is that since the assessee had filed his return of income under section 44AD of the Act, during the relevant assessment year and hence the provision of section 40(a)(ia) of the Act are not applicable, as the section 44AD begins with non-obstante clause therefore overrides sections 28 to 43C of the Act and therefore provision of section 40(a)(ia) are not applicable to the assessee under consideration, hence the addition made by the assessing officer may be deleted. 8. On merits of the case, ld. Counsel has submitted a chart before the Bench, which is part of his written submissions and explained each addition made by assessing officer and has also furnished the justification that why the disallowance on account of non-deduction of TDS should not be made. The said chart is reproduced below: "Assessee paid the amount of Rs. 11,59,064/- on account of the interest and job work charges as per following details. Sr. No Nature of Addition Amount Amount Remarks 1 Interest paid to NBFC - Reliance Capital Ltd. 6,91,664 6,91,664 Interest p....
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....see under section 44AD of the Act declaring the profit more than @8% as per the provisions of law. However, the assessing officer disallowed interest expense amounting to Rs. 10,12,346/- and job work expenses of Rs. 1,46,718/-, aggregating Rs. 11,59,064/- under section 40(a)(ia) of the Act. The contention of the assessing officer is that the provisions under sections 28 to 43C of the Act are provision relating to the computation of business income of the assessee, whereas the provision of section 40(a)(ia) of the Act is kind of a "restriction" on the allowance of a particular expenditure representing statutory liability unless the same has been fulfilled. The control placed by the provision of section 44AD in respect of statutory limitation holds precedence over such allowance. This is because the dues to the crown has no limitation and has precedence over all other allowance and claims. The statutory liabilities are in order even though the income has been offered and assessed under the provision of section 44AD of the Act. Therefore, assessee can not take the shelter of provisions of section 44AD of the Act, as section 44AD of the Act can not override the provisions of section 40....
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....section 40(a)(ia) of the Act falls within this range of sections 28 to 43C of the Income Tax Act. Hence, we do not agree with the contention of the assessing officer to the effect that the assessee cannot take the benefit of provisions of section 44AD of the Act, for that we rely on the judgment of the SMC Bench, Kolkata in the case of Jaharlal Mukherjee v. ITO (in ITA No. 73/Kol/2014) (Kolkata -Trib), A.Y.2008-09, order dated 05.08.2015, wherein it was held as follows:- "10. Ground Nos. 3, 5, 6 and 7 are identical in nature and taken up together herein. The ld. DR did not refute the claim of the assesee in respect of applicability of section 44AD for A.Y.2008-09. For the sake of convenience the provision of section 44AD is reproduced hereunder :- "44AD (1) Notwithstanding anything to the contrary contained in section 28 to 43C, in the case of an assessee engaged in the business of civil construction or supply of labour for civil construction, a sum equal to eight per cent of the gross receipts paid or payable to the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum as declared by the ass....
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.... business income by applying the provisions of sections 28 to 43C (including section 40(a)(ia) of the Act) would get telescoped with the presumptive income determined. For this reason, the legislature had provided section 44AD of the Act with a non obstante clause having an over riding effect over other provisions of sections 28 to 43C of the Act. It is pertinent to dwell upon the impact of non obstante clause at this stage. It is well known that the non obstante clause is a legislative device which is usually employed to give over riding effect to certain provisions over sum contrary provision that may be either in the same enactment or some other enactment to say "to avoid the operation and effect of all contrary provisions". Reliance is placed in this regard on the following decisions : (i)Union of India vs. G.M.Kokial reported in AIR 1984 (SC) 1022 at page 1026. (ii)R.M. Adaikalava, vs. State of Tamil Nadu reported in 238 ITR 263 at 674 (Madras Full Bench decision). It is well settled that while dealing with the "non obstante clause" in which the legislature wants to give overriding effect to section. "it must try to find out to the ....
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....ourt in the case of Indwell Constructions vs CIT reported in 232 ITR 776 (AP), wherein Lordships had held as under :- "The pattern of assessment under the Income-tax Act, 1961, is given by section 29 which states that the income from profits and gains of business shall be computed in accordance with the provisions contained in sections 30 to 43D of the Act. Section 40 provides for certain disallowances in certain cases notwithstanding that those amounts are allowed generally under other sections. The computation under section 29 is to be made under section 145 on the basis of the books regularly maintained by the assessee. If those books are not correct or complete, the Income-tax Officer may reject those books and estimate the income to the best of his judgment. When such an estimate is made, it is in substitution of the income that is to be computed under section 29. In other words all the deductions which are referred to under section 29 are deemed to have been taken into account while making such an estimate. This will also mean that the embargo placed in section 40 is also taken into account." This decision supports the view that when the assessee cannot clai....
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....er section 44AB of the Act. The turnover/sales of the assessee for the assessment year 2013-14 is to the tune of Rs. 92,33,844/-, which is below the threshold limit of one crore rupees as prescribed in section 44AD of the Act, therefore the assessee has opted the benefit of provisions of section 44AD of the Act. The turnover of the previous Assessment Year 2012-13 should not be utilized by the assessing officer to make the assessee liable to deduct TDS in the Assessment Year 2013-14, as each Assessment Year is a different assessment unit. Thus, it is abundantly clear from the above facts that since the assessee's turnover for the Assessment Year 2013-14 is to the tune of Rs. 92,33,844/- and the assessee had filed the return of income on presumptive basis u/s.44AD of the Act, therefore assessee is entitled to take the benefit of the provisions of section 44AD of the Act, and hence assessee is not liable to deduct TDS under section 40(a)(ia) of the Act. For that we rely on the judgement of the Co-ordinate Bench of ITAT Kolkata in the case of ITO v. Mark Construction (2012) 23 taxmann.com 398 (Kol.), wherein it was held as follows:- "6. After hearing the rival submissions ....
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....he Act. At this juncture it is also important to note that Article 265 of the Constitution of India lays down that, "No tax shall be levied or collected except by authority of law". The Hon'ble Supreme Court of India has held that the provision under Article 265 of the Constitution of India is applicable not only for levy but also for the collection of taxes and the expression "assessment" within its compass covers both the aspects carried out by the executive functionary [Chottabhai Vs. Union of India 1962 SCR Supl.2 1006]. Therefore, it is required that whole of the process of taxation must follow the procedures which are valid under the law and must adhere to law i.e. substantive one as well as procedural one too. Therefore, in other words it is provided in the Constitution of India that every step should be taken to ensure that levy and collection of the taxes is strictly in accordance with law - not only substantive one but the procedural law, as well. Therefore, we do not agree with the statement of the assessing officer to the effect that "the dues to the crown has no limitation and has precedence over all other allowance and claims." The assessee's turnover for the Asses....