M/S Alfran Construction Pvt.ltd, Gomes Cato Complex,Near Cine Alankar, Mapusa-Goa v. Bhadang, Jj

IN THE HIGH COURT OF BOMBAY AT GOATAX APPEAL NO. 13 OF 2012 The Assistant Commissioner ofIncome Tax, Circle-2(1), Panaji,Goa. … Appellant V e r s u s M/s Alfran Construction Pvt.Ltd, Gomes Cato Complex,Near Cine Alankar, Mapusa-Goa. … Respondent Ms. Amira Razaq, Standing Counsel for the Appellant. Coram :-M. S. SONAK & C. V. BHADANG, JJ. Date :2nd December, 2019. ORAL JUDGMENT(Per M. S. Sonak, J) 1. Heard Ms. Razaq, the learned Standing Counsel for the Income Tax Department for the appellant. 2.The respondents though served, neither present nor represented. 3.This appeal was admitted on 14.02.2012 on the following substantial questions of law : (A) Whether the Section 194 C could be invokedrequiring the Assessee to deduct tax at source on thecost of the construction incurred by M/s PrabhuConstruction deeming it as a contract? (B) Whether consequent provision of sec 40(a)(ia)would also apply in making disallowing of expenditurein computing his income from business andprofession? 4.Ms. Razaq, the learned Standing Counsel for the applicant submits that in the present case, the Assessee was itself thecontractor who had undertaken to complete two projects i.e.Mount Mary's project and M/s. Alfraz Plaza project. TheAssessee by Agreement dated 23.11.2003 had purported to assign its rights in favour of M/s Prabhu Construction, a proprietaryconcern of Shri Venkatesh Prabhu Moni. Ms. Razaq submits thatsince the Assessee could not transfer or assign any better rights or title in favour of M/s. Prabhu Construction, it is obvious thatM/s. Prabhu was also a contractor engaged by the Assessee. Shesubmits that in such circumstances, the provisions of Section194C of the Income Tax Act (ITA) were very clearly attracted andthe Assessee was obliged to effect tax deduction at source. Shesubmits that inasmuch as this has not been done and thisparticular aspect has not been appreciated, the two substantialquestions of law as framed are required to be answered in favourof the Revenue and against the Assessee. 5.In this case, the Assessee vide two separate agreements dated01.03.2003 and 13.11.1991 respectively, had agreed with theowners to undertake the projects of construction of MountMary's Complex and M/s. Alfran Plaza. The terms of theseagreements do not indicate that the Assessee was appointed asmerely a contractor to construct these projects. Rather, theAssessee was to be allotted premises/area in the said projectadmeasuring 5047.66 square metres and 1515.35 square metres. The Assessee was given the full liberty to thereafter sell, transferand convey these areas in favour of third party. Accordingly, it isnot correct to say that the original status of the Assessee was thatof a contractor and, consequently, Assessee was incapable ofassigning any rights better than that of a contractor of M/sPrabhu Construction. 6.The CIT(Appeals) as well as the Income Tax AppellateTribunal (ITAT), upon consideration of the clauses of theagreements concluded that the Asseesee assigned the rights infavour of M/s. Prabhu Construction. They have concurrentlyheld that this was sale of area in the two projects and this was nota case where the Assessee had merely engaged M/s. PrabhuConstruction as its contractor. These findings of fact,concurrently recorded cannot be said to be vitiated by anyperversity or misreading of the documents on record. The twoauthorities have basically taken a plausible view on the basis of theinterpretation of the agreements which forms part of the record. In the absence of any use of perversity being made out, it wouldnot be proper for us to interfere in such finding of fact in exerciseof the jurisdiction under Section 260 A of the IT Act. In the absence of any use of perversity being made out, it wouldnot be proper for us to interfere in such finding of fact in exerciseof the jurisdiction under Section 260 A of the IT Act. 7.Once the finding of facts are to be sustained, it is obviousthat the provisions of Section 194 C of the IT Act cannot be saidto be attracted. Section 194 C of the IT Act deals with deductionof tax at source when it comes to payment to contractors. In thepresent case, since neither the Assessee nor M/s. PrabhuConstruction can be styled as contractors, it is obvious that theprovisions of Section 194 C of the IT Act were not attracted asheld by both the Commissioner (Appeals) and the ITAT. 8.Section 194-C of the IT Act refers to any personresponsible for paying 'any sum' to any resident referred to ascontractor in the said section for carrying out any work inpursuance of a contract. The expression 'sum', in the context,would mean sum of cash money as was held by the Hon'bleSupreme Court in the case of H.H. Sri Rama Verma vs. Commissioner of Income Tax, Ernakulam, 1991 Supp (1)SCC 209, though in the context of the provisions of Section 80-G of the IT Act as then stood. The Hon'ble Apex Court has heldthat when the language of the provision is plain and clear, theCourts cannot enlarge the scope of the provision by adopting aninterpretative process. 9.Accordingly, the first substantial question of law isliable to be answered against the Revenue and in favour of the Assessee. 10.The second question of law is really consequentialand depends upon the answer to the first substantial question oflaw. If the ITAT, in the impugned order had held that since theprovisions of Section 194-C were not applicable, the consequentprovisions of Section 40(a)(ia), will also not apply for makingdisallowance of the expenditure in computing the income underthe head 'income from business or profession'. The ITAT, insuch circumstances, was quite justified in holding that the CIT was not right in taking the view as the costs incurred in construction is a capital cost for computation of income under Section 48 of the IT Act. Accordingly, even the second substantial question of law is required to be answered against theRevenue and in favour of the Assessee. 11.Accordingly, both the substantial questions of law are liable to be answered against the Revenue and in favour of the Assessee. 12.As a consequence, this appeal fails and is hereby dismissed.There shall be no order as to costs. C. V. BHADANG, J. M. S. SONAK, J. arp/*