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2019 Supreme(Mad) 913
IN THE HIGH COURT OF JUDICATURE AT MADRAS
VINEET KOTHARI, C.V. KARTHIKEYAN, JJ.
M/s. Kramski Stamping & Molding India P. Ltd. - Appellant
Versus
The Assistant Commissioner of Income Tax - Respondent
T.C.(A). No. 170 of 2019
Decided On : 04-04-2019
Advocate Appeared:
For the Appellant :R. Sivaraman, Advocate.
For the Respondent: M. Swaminathan, Senior Standing Counsel assisted by V. Pushpa, Standing Counsel.
The central legal point established in the judgment is the duty of the appellate forums to thoroughly analyze the facts and legal contentions before making a decision, and the requirement for proper application of mind by the lower authorities in addressing the contentions raised by the Assessee.
Headnote:
TDS - Income Tax - Section 194C, Section 40A(ia) - Summary of Acts and Sections: The court discussed the applicability of Section 194C and Section 40A(ia) of the Income Tax Act, 1961 in relation to the disallowance made for non-deduction of TDS by the Assessee. The court analyzed the provisions of Section 194C and the Explanation appended to it, and the retrospective applicability of Section 40A(ia). The court also considered the definition of 'work' under Section 194C and its application to the case. The court highlighted the interpretation of the legal provisions and their influence on the decision, leading to the remittance of the matter back to the CIT (Appeals) for fresh consideration.
Fact of the Case:
The Assessee filed an Appeal against the order of the Income Tax Appellate Tribunal, which upheld the disallowance made by the Assessing Authority under Section 40A(ia) of the Income Tax Act for non-deduction of TDS on payment to M/s.Spectronic Plating (P) Ltd for electro-plating job work.
Finding of the Court:
The court found that the authorities below erred in applying the provisions of Section 194C and Section 40A(ia) without proper consideration of the facts and legal contentions raised by the Assessee. The court concluded that the matter deserved fresh consideration and remitted it back to the CIT (Appeals) for proper adjudication.
Issues: The issues involved in the case were the applicability of Section 194C and Section 40A(ia) of the Income Tax Act, the interpretation of the term 'work' under Section 194C, and the retrospective applicability of Section 40A(ia).
Ratio Decidendi: The court's decision was based on the failure of the lower authorities to properly address the contentions raised by the Assessee and the non-application of mind in affirming the disallowance under Section 40A(ia). The court emphasized the duty of the appellate forums to thoroughly analyze the facts and legal contentions before making a decision.
Final Decision: The Tax Case Appeal was disposed of by remanding the case back to the CIT (Appeals) for fresh consideration, without answering the Substantial Questions of Law raised before the court.
VINEET KOTHARI, J.
(Prayer: Tax Case (Appeal) is filed under Section 260-A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Chennai 'C' Bench, dated 02.04.2018 passed in I.T.A.NO.1987/CHNY/2016 for the Assessment Year 2012-13.)
1. The Assessee has filed the present Appeal under Section 260A of the Income Tax Act, 1961 ('Act' in short) raising the Substantial Questions of Law, arising from the order of the Income Tax Appellate Tribunal dated 02.04.2018, by which, the learned Tribunal dismissed the Assessee's Appeal for the Assessment Year 2012-2013 and upheld the disallowance made by the Assessing Authority as well as First Appellate Authority under Section 40A(ia) of the Act on account of not making Tax Deduction at Source by the Assessee on making payment to M/s.Spectronic Plating (P) Ltd, for the alleged job work of Electro-plating undertaken by the said Company on the copper rolls sent by the Assessee.
2. The Substantial Questions of Law raised in the present Appeal filed by the Assessee are as follows:
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the disallowance as prescribed u/s.40 (a)(ia) of the Income Tax Act for the non-deduction of TDS would be applicable to the appellant when the work done by M/s.Spectronics Plating (P) Ltd is not a job work?
2. Whether on the facts and circumstances of the case, the Tribunal was right in holding that the disallowance as prescribed u/s.40(a) (ia) of the Income Tax Act for the non-deduction of TDS would be applicable, ignoring the retrospective applicability of s.40(a)(ia) of the Income Tax Act?
3. Whether, on the facts and circumstances of case, the Tribunal was right in not taking into consideration that there is no revenue loss for the respondent as M/s.Spectronics Plating (P) Ltd has discharged the liability of the appellant by paying tax on that portion of income accrued?"
3. The learned counsel for the Assessee Mr.R.Sivaraman submitted before us that the provisions of Section 194C of the Act, providing for such Tax Deduction at Source on the job work, is not attracted in the present case. Therefore, the authorities below have erred in applying the said provisions and consequently upheld the disallowance under Section 40A(ia) of the Act. He drew our attention to Clause(iv) of Explanation appended to Section 194C of the Act, which is quoted below for ready reference:
"194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to-
(i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family;
(ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein."
Explanation-For the purposes of this Section,-
(iv) "work" shall include-
(a) advertising;
(b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting;
(c) Carriage of goods or passengers by any mode of transport other than by railways;
(d) catering;
(e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such cust
