Bombay High Court
The Commissioner Of Income Tax-Iv vs Sunil Vishwambharnath Tiwari on 11 September, 2015
Bench: B.P. Dharmadhikari
Judgment itl2.11
1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR.
INCOME TAX APPEAL NO. 2/2011.
The Commissioner of Income
Tax-IV, Aayakar Bhawan, Nagpur. ....APPELLANT.
ig VERSUS
Sunil Vishwambharnath Tiwari,
Hindustan Colony, Wardha Road,
Nagpur. ....RESPONDENT
.
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Mr. Anand Parchure, Advocate for the Appellant.
Mr. N.S. Bhattad, Advocate for Respondent.
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CORAM : B.P. DHARMADHIKARI
& P.N. DESHMUKH, JJ.
Date of Reserving the Judgment : 31.08.2015.
Date of Pronouncement : 11.09.2015.
Judgment itl2.11
JUDGMENT. (Per B.P. Dharmadhikari, J)
Heard Shri Anand Parchure, learned Counsel for the appellant and
Shri N.S. Bhattad, learned Counsel for the respondent.
2. By this appeal filed under Section 260A of the Income Tax Act,
1961, the appellant - Income Tax Department has sought to raise following
two questions, as substantial questions of law :
"(1) Whether on the facts and in the circumstances of
the case that ITAT was correct in holding that the
entire amount of gross total income of the assessee
is eligible for deduction under section 80IB of the
Income Tax Act ?
(2) Whether on the facts and in the circumstances of
the case, the ITAT was justified in holding that the
dis-allowance made under section 40(a)(ia) of the
Income Tax Act separately is not permissible under
the scheme of the Income Tax Act ?"
3. The facts in brief are, that the assessee whose eligibility to claim
deduction under Section 80IB (10) of the Income Tax Act, 1961 (hereinafter
referred to as "the Act" for short), is not in dispute, filed a return in
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Assessment Year 2006-07 for accounting period 01.04.2005 to 31.03.2006,
claiming deduction of Rs. 16,82,121/- under that provision. It was taken up
for scrutiny, and an order under Section 143(3) of the Act came to be
passed, dis-allowing the expenses under Section 40[a][ia] of the Act for not
deducting TDS at source. Thus, payment of Rs.83,00,738/- under the head
Subcontract payment; Rs. 1,75,000/- as Commission payments and
Rs.7,96,375/- as Advertisement Payment was dis-allowed.
4. The Assessing Officer though allowed deductions under Sections
80IB(10) of the Act, assessed total income of Rs.92,71,375/- on account of
above dis-allowance. The assessee filed an appeal before the CIT (Appeals),
which held that there could not have been such separate treatment to
income and deductions under Section 80IB of the Act needed to be allowed
on gross total income of the assessee. Income Tax Department preferred
further appeal before the ITAT, which rejected that appeal.
5. Shri Parchure, learned counsel appearing on behalf of the
appellant/department submits that the correctness or otherwise of dis-
allowance is not in dispute before this Court. Violation of Section 194C and
194H of the Act is accepted, and as such, the dis-allowance was not arising
out of eligible business. He states that the word "derived from" cannot have
Judgment itl2.11
such wide impact, so as to include any income which can in some manner be
attributed to the business. It is further submitted that in present matter, the
assessee can claim these expenses as per the provisions in Section 40[a][ia],
if TDS is paid in later year. Thus, in subsequent assessment years, the
assessee would be able to claim deduction from his profit, on account of
these expenses, hence, purpose of having Section 40[a][ia] itself gets
defeated. He submits that the judgment of this High Court in CIT / Shirke
Constructions and Equipments Ltd. (246 ITR 429) is not attracted here.
6. Shri Bhattad, learned counsel for the respondent - assessee on the
other hand states that in said matter decided by this Court, the assessee M/s.
Shirke Constructions and Equipments Ltd., also had other sources of income,
and hence application of mind therein needs to be understood properly.
Here, the respondent - assessee (Sunil Vishambharnath Tiwari) does not
have any other source of income, except eligible business and this fact is not
in dispute. Therefore, the deduction of payment made to contractor is out
of eligible profits and even if ignored for the purpose of computing net
income, it gets added only to the eligible income. Disallowance of
expenditure only adds to it and that income does not become taxable. The
fact that the assessee had filed 'nil' return, cannot be lost sight of.
Judgment itl2.11
7. According to him, technical violation pointed by Shri Parchure,
learned counsel does not result in change of nature of income and as such,
the concurrent view of CIT (Appeals) and ITAT needs to be upheld.
8. After hearing the respective counsel, we find that the fact that TDS
was not effected by the respondent assessee, is not in dispute. In view of
the scheme of Section 40 of the Act, as TDS is not effected, payment to
contractors cannot be deducted, as those expenditure become inadmissible.
The expenditures therefore are added back to the income, which is nothing
but, eligible income. This income which is eligible for deduction in terms of
Section 80IB(10) of the Act, therefore, only increases by said figure of
disallowed expenditure.
9. CIT (Appeals) has in this background referred to the above
referred judgment in case of Shirke Constructions and Equipments Ltd
(supra), wherein distinction between certain Sections of Chapter VI-A,
which refer to deduction out of gross total income and other sections of
Chapter VI-A, which do not make such reference to gross total income, has
been explained. CIT (appeals) has correctly pointed out that the deduction
allowable under Section 80IB(10) of the Act is with reference to the
respondents gross total income. Hence, dis-allowance under Section 40[a]
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[ia] cannot be treated separately and it gets added back to the gross total
income of the assessee. Section 40 itself points out that due to error of
assessee, such expenditure cannot be deducted while computing income
chargeable under the head "profit and gains of business or profession". That
is the only limited effect of the lapse on the part of the respondent - assessee
in the present matter.
10.
ITAT has considered these facts and upheld the same.
11. We therefore, do not find any substantial questions of law arising
in the matter. Appeal is accordingly, dismissed. No costs.
JUDGE JUDGE
Rgd.
