Serial No.7 Weekly final hearing List HIGH COURT OF JAMMU AND KASHMIR AT SRINAGAR ITA No. 03/2016 Date of order: 27.07.2017 Pr. Commissioner of Income Tax Vs. Shr. Manzoor Ahmed Walvir Coram: Hon ble Mr. Justice Badar Durrez Ahmed, Chief Justice Hon ble Mr. Justice Ali Mohammad Magrey, Judge. Appearing counsel: For Appellant(s) : Mr. J. A. Kawoosa, Advocte For Respondent(s) : Mr. Azhar-ul-Amin, Advocate i) Whether approved for reporting in Yes/No Law journals etc.: ii) Whether approved for publication in press: Yes/No Per Badar Durrez Ahmed, CJ ( Oral) 1. This is appeal under section 260A of Income Tax Act, 1961 filed on behalf of Revenue being aggrieved by Income Tax Appellate Tribunal s order dated 25.02.2016 in ITA No. 417(Asr)/2012. That appeal was, in turn, directed against order of Commissioner of Income Tax (Appeals) order dated 31.08.2012 which arose out of assessment order dated 28.11.2011 in respect of assessment year 2009-10. 2. First of all, after hearing counsel for parties, we feel that question framed in order dated 21.09.2016 needs to be re-framed as under: Whether section 40 (a) (ia) is applicable only on amount payable and not on amount actually paid.? ITA No.03/2013 Page 1 of 5 3. brief facts are that respondent-assessee made payments in respect of dyeing, printing, embroidery, finishing and bleaching charges. Deductions were claimed in respect thereof to extent of Rs. 6,04,40,918/-. Assessing Officer disallowed said payment on account of default on part of assessee in not deducting TDS (Tax Deducted at Source) in terms of Section 194C of said Act. Being aggrieved by disallowance, assessee filed appeal before Commissioner of Income Tax ( Appeals) which, as mentioned above was decided on 31.08.2012. Commissioner of Income Tax ( Appeals) reduced disallowance to Rs. 1,87,87,703/- on ground that said amount was found to be payable at end of year and rest of amount out of Rs. 6,04,40,918/- had been paid during year and that was eligible. 4. One important point that needs to be noted at this juncture is that before Commissioner of Income Tax (Appeals) ground No.1 related to disallowance of said amount of Rs. 6,04,40,918/-. While addressing arguments on this ground, representative of assessee conceded before Commissioner of Income Tax (Appeals) that expenses, which were made for contractual payments, were covered under section 194C of Income Tax Act, 1961. Consequently, Commissioner of Income Tax ( Appeals) did not find it necessary to enter upon any discussion as to whether Section 194C of said Act applied or did not apply. In other words, assessee having conceded that Section 194C was applicable, Commissioner of Income Tax (Appeals) proceeded on that basis. So did Income Tax Tribunal. 5. assessee was aggrieved by partial allowance and revenue was aggrieved by partial disallowance by CIT(A). Consequently, both filed appeals before ITA No.03/2013 Page 2 of 5 Income Tax Appellate Tribunal, Amritsar Bench, Amritsar being ITA NO. 358(Asr)/2012 and ITA No. 417(Asr)/2012, respectively. By order dated 31.5.2013 Income Tax Appellate Tribunal allowed revenue appeal and partly allowed assessee s appeal for statistical purposes. result of tribunal s order was that disallowance of Rs. 6,04,40,918/- which was made by Assessing Officer under section 40 (a) (ia) of Act was restored. 6. It may be pertinent to note that in order dated 31.5.2013 Tribunal had clearly recorded admission by assessee, in para 11 of said order, that such payments, which were bone of contention, were covered under Section 194-C of said Act and that in view of this, provisions of Section 40 (a) (ia) of Act were clearly applicable in case of assessee and that contention of assessee that these payments were out of purview of Section 40 (a) (ia ) of said Act was not tenable. 7. Being aggrieved by decision of Income Tax Appellate Tribunal dated 31.5.2013 assessee filed appeal being ITA no. 06/2013 before this court. In that appeal, on 18.12.2014, this court framed following substantial question of law; Whether Section 40(a) (ia) is applicable only on amount payable and not on amount actually paid? No other question had been framed and assessee did not request for framing of any other question either before this court or before Supreme Court. ITA No.03/2013 Page 3 of 5 8. During pendency of appeal, assessee filed application under section 254 (2) of said Act seeking rectification of order dated 31.5.2013 and that application was numbered as Miscellaneous application no. 57 (Asr)/2013. By order dated 16.09.2015 said Misc. application was allowed and order dated 31.5.2013 was recalled to extent of rectification sought. 9. matter, thereafter, was once again argued on merits before Tribunal. After considering rival contentions, Income Tax Appellate Tribunal, by virtue of impugned order dated 25.2.2016, upheld decision of Commissioner of Income Tax ( Appeals) and agreed with him that disallowance to extent of Rs. 4,16,53,215/- had to be deleted. plea of revenue was rejected and order under appeal was confirmed. 10. No appeal has been filed by Assessee against order dated 25.2.2016. However, revenue has filed present appeal being ITA No. 03/2016 in which we have already re- framed question. 11. We need not labour on merits of matter inasmuch as, same had been subject matter of controversy in various High Court decisions which has now been resolved by Supreme Court in its recent decision in case of Palam Gas Services v. Commissioner of Income Tax 394ITR 300 (SC). In said decision also, section 40 (a) (ia) of said Act was subject matter of interpretation. question that Supreme Court was considering as is reflected in said decision was as under: ITA No.03/2013 Page 4 of 5 Whether provisions of Section 40 (a) (ia) shall be attracted when amount is not payable to contractor or sub-contractor but has been actually paid? This clearly demonstrates identity between issue in present appeal and that which was before Supremen Court. 12. After referring to various decisions of High Courts, Supreme Court concluded that Section 40(a)(ia) covered not only those cases where amounts were payable but also those where it was paid. Accordingly, question framed is decided in favour of Revenue and against Assessee in terms of Supreme Court decision. Consequently present appeal is allowed, result whereof shall be that view taken by Assessing Officer of disallowance of Rs. 6,04,40,918/- is upheld. 13. Impugned judgment to aforesaid extent, is set aside and accordingly view taken by Assessing Officer is restored. (Ali Mohammad Magrey) (Badar Durrez Ahmed) Judge Chief Justice Srinagar 27.07.2017 Mujtaba Secy ITA No.03/2013 Page 5 of 5 Pr. Commissioner of Income-tax v. Manzoor Ahmed Walvir