TaxTMI 
TaxTMI 
2025 (4) TMI 1627
X X X X Extracts X X X X
X X X X Extracts X X X X
....30-03-2013 under Section 143 (3) of the Income Tax Act, 1961, on a total income of Rs. 8,99,42,090/-. The Assessee filed return disclosing total income of Rs. 9,36,120/-. The return was processed under Section 143(1) of the Act and same was selected for scrutiny under CASS. The reason for selection of the case for scrutiny assessment was to examine the various aspects of the contractor business. Finally, the Assessing Officer completed the assessment under Section 143 (3) of the Act determining total income at Rs. 8,99,42,090/-. The Assessee being aggrieved challenged the Assessment Order of the AO before the CIT (A) being Appeal No. 520/Jsr./ 2012-13. The CIT(A) vide order dated 29-08-2014 has partly allowed the appeal of the assessee and sustained few additions made by the Assessment Officer. The assessee as well as the Revenue Authority challenged the Order of the CIT (A) before the learned ITAT. The assessee's appeal was registered as I.T.A. No. 308/Ran/14 and the revenue's appeal was registered as I.T.A. No. 309/Ran/14 for the A.Y. 2010-11. The learned Tribunal vide its common order dated 11-03-2016 has been pleased to allow the case of the assessee and dismissed the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has over-ruled the judgment passed by Allahabad High Court holding it to be not good in law. 9. Learned counsel for the appellant, based upon the aforesaid ground, has submitted that since the very basis of impugned order has been held to be not good in law, therefore, the matter requires consideration. Submission on behalf of respondent: 10. While on the other hand, Mr. Mahendra Kumar Choudhary, learned counsel appearing for the assessee has argued that even on merit there is no case of the revenue and as such these matters may be decided on its own merit. However, he has not disputed the fact that the law laid by Allahabad High Court in the case of CIT Vs. Vector Shipping Services (P) Ltd. (supra) has been over-ruled by Hon'ble Apex Court in the case of Palam Gas Service Vs. Commissioner of Income Tax (supra). Analysis: 11. We have heard learned counsel for the parties and gone through the pleading made in the memo of appeal and the finding recorded by learned Tribunal. 12. The issue in dispute is consideration/interpretation of Section 40 (a) (i-a) of the Income Tax Act, the same refers with respect to the payable amount. Section 40 of the Act enumerates certain situations....
X X X X Extracts X X X X
X X X X Extracts X X X X
....egistered as I.T.A. No. 309/Ran/14 for the A.Y. 10-11. 15. The assesse relied upon the judgment passed in CIT Vs. Vector Shipping Services (P) Ltd. (supra), wherein consideration has been made that interest upon the TDS is not to be carried out on the amount already paid in the financial year. The Tribunal, relying the judgment rendered in the case of CIT Vs. Vector Shipping Services (P) Ltd. (supra), vide its common order dated 11-03-2016 has allowed the case of the Assessee and dismissed the case of the Revenue, and deleted the entire addition made by the AO. 16. Being aggrieved with the common order dated 11.03.2016 passed in I.T.A. No. 308/Ran/14 and I.T.A. No. 309/Ran/14, the appellant has approached this Court. 17. It is pertinent to note herein that consideration which has been given by the Allahabad High Court with respect to interpretation to provision of Section 40 (a) (i-a) of the Income Tax Act, fell for consideration before the Hon'ble Apex Court in the case of Palam Gas Service Vs. Commissioner of Income Tax (supra). 18. The Hon'ble Apex Court has interpreted the issue namely the word 'payable' in Section 40 (a) (i-a) which would mean only when the amount is payab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h effect from 1-4-2005. The Explanatory Note to Finance Bill, 2004 stated: '... With a view to augment compliance of TDS provisions, it is proposed to extend the provisions of Section 40 (a) (i) to payments of interest, commission or brokerage, fees for professional services or fees for technical services to residents, and payments to a resident contractor or sub-contractor for carrying out any work (including supply of labour for carrying out any work), on which tax has not been deducted or after deduction, has not been paid before the expiry of the time prescribed under sub-section (1) of Section 200 and in accordance with the other provisions of Chapter XVII-B.' 21. The adherence to the provisions ensures not merely the collection of tax but also enables the authorities to bring within their fold all such persons who are liable to come within the network of taxpayers. The intention was to ensure the collection of tax irrespective of the system of accounting followed by the assessees. We do not see how this dual purpose of augmenting the compliance of Chapter XVII and bringing within the Department's fold taxpayers is served by confining the provisions of Section 40 (a) (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....201 of the Act. This section provides that in that contingency, such a person would be deemed to be an assessee in default in respect of such tax. While stipulating this consequence, Section 201 categorically states that the aforesaid sections would be without prejudice to any other consequences which that defaulter may incur. Other consequences are provided under Section 40 (a) (i-a) of the Act, namely, payments made by such a person to a contractor shall not be treated as deductible expenditure. When read in this context, it is clear that Section 40 (a) (i-a) deals with the nature of default and the consequences thereof. Default is relatable to Chapter XVII-B (in the instant case Sections 194-C and 200, which provisions are in the aforesaid Chapter). When the entire scheme of obligation to deduct the tax at source and paying it over to the Central Government is read holistically, it cannot be held that the word "payable" occurring in Section 40 (a) (i-a) refers to only those cases where the amount is yet to be paid and does not cover the cases where the amount is actually paid. If the provision is interpreted in the manner suggested by the appellant herein, then even when it is f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncluding Section 40 and the provisions of Chapter XVII do not entitle the tax authorities to adjudicate the liability of an assessee to make payment to the payee/other contracting party. The appellant's submission, if accepted, would require an adjudication by the tax authorities as to the liability of the assessee to make payment. They would then be required to investigate all the records of an assessee to ascertain its liability to third parties. This could in many cases be an extremely complicated task especially in the absence of the third party. The third party may not press the claim. The parties may settle the dispute, if any. This is an exercise not even remotely required or even contemplated by the section." 19. The Hon'ble Apex Court in the light of consideration so made has been pleased to hold that the view taken by the High Courts of Punjab and Haryana [P.M.S. Diesels v. CIT, 2015 SCC OnLine P&H 8793 : (2015) 374 ITR 562], Madras [Tube Investments of India Ltd. v. CIT, 2009 SCC OnLine Mad 2976 : (2010) 325 ITR 610] and Calcutta [CIT v. Crescent Export Syndicate, 2013 SCC OnLine Cal 23014 : (2013) 262 CTR 525 : (2013) 216 Taxman 258] as the correct view. 20. The H....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... SCC OnLine All 13698 : (2013) 357 ITR 642] did not decide the question of law correctly. Thus, insofar as the judgment of the Allahabad High Court is concerned, we overrule the same. Consequences of the aforesaid discussion will be to answer the question against the appellant/assessee thereby approving the view taken by the High Court." 22. Admittedly, the impugned order has been passed on 11.03.2016 and the judgment has been passed in Palam Gas Service Vs. Commissioner of Income Tax (supra) is on 03.05.2017 i.e., subsequent to the impugned order. Therefore, the question may arise that as to whether the judgment which is subsequent to the decision taken by the forum can be made applicable retrospectively? 23. The aforesaid issue has been considered by the Hon'ble Apex Court in the recent judgment rendered in the case of Directorate of Revenue Intelligence vs. Raj Kumar Arora & Ors. [Criminal Appeal No. 1319 of 2013] passed on 17th April, 2025, wherein the law has been laid down that the when a previous judgment is overruled by a subsequent one, the later judgment operates retrospectively, as it clarifies the correct legal position that may have been misunderstood due to the earl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hich existed from the inception of the concerned statute or provision. What has been declared to be the law of the land must be held to have always been the law of the land. This conclusion also stems from the rationale that the duty of the court is not to "pronounce a new law but to maintain and expound the old one". The judge rather than being the creator of the law, is only its discoverer 93. This Court in Sarwan Kumar and Another v. Madan Lal Aggarwal reported in (2003) 4 SCC 147, opined that when this Court interprets an existing law while overruling the interpretation assigned to it earlier, it cannot be said that a new law is laid down. The declaration of law relates back to the law itself. In other words, it would be deemed that the law was never otherwise. Herein, a 5-judge bench of this Court in Gian Devi Anand v. Jeevan Kumar and Others reported in (1985) 2 SCC 683 had held that the rule of heritability extends to the statutory tenancy of a commercial premises as much as to a residential premises under the Delhi Rent Control Act, 1958. In light of the same, the question for determination in Sarwan Kumar (supra) was whether a decree for ejectment which was passed by a c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rovision relates back to the date of the law itself and cannot be prospective of the judgment. When the court decides that the interpretation given to a particular provision earlier was not legal, it declares the law as it stood right from the beginning as per its decision. In Gian Devi case [(1980) 17 DLT 197] the interpretation given by the Delhi High Court that commercial tenancies were not heritable was overruled being erroneous. Interpretation given by the Delhi High Court was not legal. The interpretation given by this Court declaring that the commercial tenancies heritable would be the law as it stood from the beginning as per the interpretation put by this Court. It would be deemed that the law was never otherwise. Jurisdiction of the civil court has not been taken away by the interpretation given by this Court. This Court declared that the civil court had no jurisdiction to pass such a decree. It was not a question of taking away the jurisdiction; it was the declaration of law by this Court to that effect. The civil court assumed the jurisdiction on the basis of the interpretation given by the High Court in Gian Devi case [(1980) 17 DLT 197] which was set aside by this Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aw is that a judge does not make law; he merely declares it; and the overruling of a previous decision is a declaration that the supposed rule never was law. Hence any intermediate transactions made on the strength of the supposed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regards matters that are res judicate or accounts that have been settled in the meantime." (Emphasis supplied) 24. Herein, in the instant case also, the sole consideration taken by the forum is the judgment passed by the Allahabad High Court in CIT Vs. Vector Shipping Services (P) Ltd. (supra), which has been over-ruled by the Hon'ble Apex Court in the case of Palam Gas Service Vs. Commissioner of Income Tax (supra), holding therein that the Allahabad High Court has not laid down good law; meaning thereby the error has been rectified by the Hon'ble Apex Court, said to be committed by the Allahabad High Court, by laying down the correct law. Therefore, applying the law laid down by the Hon'ble Apex Court in the case of Directorate of Revenue Intelligence vs. Raj Kumar Arora & Ors. (supra), will have retrospective application. 25. This Court, ....