M/S Ivrcl-Kbl (Jv), Having Regd.office At v. Assistant Commissioner Of Income Tax, Circle-7(1

IN THE HIGH COURT OF JUDICATURE AT HYDERABADFOR THE STATE OF TELANGANA AND THE STATE OF ANDHRAPRADESH***** Writ Petition Nos. 31680, 31681, 31740, 31741, 31748, 31763, 42408,42489, 42657, 42666, 42667, 42678, 43038, 43069 & 43078 of 2015 M/s IVRCL-KBL (JV), Having regd.office at No.10-3-552/B, M-22/2RT, Vijayanagar Colony, Hyderabad …. Petitioner Vs. Assistant Commissioner of Income Tax, Circle-7(1), IT Towers, Hyderabad & 3 others. …. Respondents DATE OF JUDGMENT PRONOUNCED: 29.02.2016. SUBMITTED FOR APPROVAL: THE HON’BLE SRI JUSTICE RAMESH RANGANATHANAND THE HON’BLE SRI JUSTICE M.SATYANARAYANA MURTHY 1.Whether Reporters of Local newspapers may be allowed to see the Judgments? 2. Whether the copies of judgment may be marked to Law Reports/Journals to Law Reports/Journals 3. Whether Their Ladyship/Lordship wish to see the fair copy of the Judgment? fair copy of the Judgment? JUSTICE RAMESH RANGANAT *THE HON’BLE SRI JUSTICE RAMESH RANGANATHANAND *THE HON’BLE SRI JUSTICE M.SATYANARAYANA MURTHY + Writ Petition Nos. 31680, 31681, 31740, 31741, 31748, 31763, 42408,42489, 42657, 42666, 42667, 42678, 43038, 43069 & 43078 of 2015 % Dated 29.02.2016 M/s IVRCL-KBL (JV), Having regd.office at No.10-3-552/B, M-22/2RT, Vijayanagar Colony, Hyderabad …. Petitioner Vs. $ Assistant Commissioner of Income Tax, Circle-7(1), IT Towers, Hyderabad & 3 others. …. Respondents ! Counsel for the petitioner: Sri Ch.Pushyam Kiran ^ Counsel for respondents: Sri T.Vinod Kumar, Standing Counsel for IncomeTax Department. <GIST: HEAD NOTE: ? Citations: 1)(2006) 12 SCC 5832)(1976) 1 SCC 245 3) (2006) 3 SCC 434 4) (1999) 6 SCC 418 5) (1985) 4 SCC 404 6) AIR 1961 SC 751 7) (1960) 1 SCR 200 8) (2004) 1 SCC 574 9) (1962) 2 SCR 159 10) AIR 1965 SC 1728 11) AIR 1991 SC 1406 12) AIR 1991 SC 1538 13) (1994)5 SCC 672 14) 1959 Supp (2) SCR 256 15) (1955) 2 SCR 483 16) 1959 Supp (2) SCR 875 17) (1976) 1 SCC 128 18) AIR 1965 SC 59 19) (1985) 1 SCC 591 20) AIR 1957 SC 281 21) (1989) 1 SCC 321 22) (2013) 357 ITR 396 (AP) 23) AIR 1972 SC 1781 24) AIR 1968 SC 1286 THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN AND THE HON’BLE SRI JUSTICE M.SATYANARAYANA MURTHY Writ Petition Nos. 31680, 31681, 31740, 31741, 31748, 31763, 42408, 42489,42657, 42666, 42667, 42678, 43038, 43069 & 43078 of 2015 COMMON ORDER:(per Hon’ble Sri Justice Ramesh Ranganathan) Five joint-venture entities have invoked the jurisdiction of this Courtquestioning the orders passed by the Assessing Authority, for the assessmentyears 2010-11 to 2012-2013, denying them credit for the tax deducted atsource by the Government of Andhra Pradesh from their bills. S ri S.Ravi,learned Senior Counsel appearing on behalf of the petitioner, and SriB.Narasimha Sarma and Sri T.Vinod Kumar, learned Senior Standing Counselfor Income Tax, would agree that it would suffice, for the disposal of all thesewrit petitions, if the contents of the assessment order, in W.P.No.31748 of2015, are alone noted. Writ Petition Nos. 31680, 31681, 31740, 31741, 31748, 31763, 42408, 42489,42657, 42666, 42667, 42678, 43038, 43069 & 43078 of 2015 COMMON ORDER:(per Hon’ble Sri Justice Ramesh Ranganathan) Five joint-venture entities have invoked the jurisdiction of this Courtquestioning the orders passed by the Assessing Authority, for the assessmentyears 2010-11 to 2012-2013, denying them credit for the tax deducted atsource by the Government of Andhra Pradesh from their bills. S ri S.Ravi,learned Senior Counsel appearing on behalf of the petitioner, and SriB.Narasimha Sarma and Sri T.Vinod Kumar, learned Senior Standing Counselfor Income Tax, would agree that it would suffice, for the disposal of all thesewrit petitions, if the contents of the assessment order, in W.P.No.31748 of2015, are alone noted. The assessment order dated 26.02.2015, passed in respect ofM/s.IVRCL-KBL (JV) for the assessment year 2012-13, records that theassessee was a joint-venture executing civil contract works; they had filed theirreturn of income, for the assessment year 2012-13, electronically declaringtheir total income as Rs.‘Nil’; they had claimed refund of Rs.23,39,240/-; theircase was selected for scrutiny, and subsequently a notice under Section143(2) of the Income Tax Act, 1961 (for short “the Act”) was issued and servedon the assessee; later a notice under Section 142(1) of the Act was issuedalong with a questionnaire; in response thereto, the authorized representativeof the assessee appeared and furnished the information; the assessee-JV wasawarded contracts by the Irrigation Department of the Government of AndhraPradesh; later these contracts were given by the assessee on sub-contract, toone of its constituents, on a back to back basis without any margin; during theassessment year under consideration, the assessee had declared grossreceipts of Rs.1,07,55,16,904/-, and the same was passed on to the sub-contractor; and, in view of the above, the income of Rs.“Nil”, as returned by theassessee, was accepted. While disallowing the petitioner’s claim for refund, ofthe tax deducted at source from their bills by the Government, the assessingauthority held that, from the agreement signed between the JV and theconstituent, it was clear that the JV was just a procedural device used forsubmitting the bid; all the contract works were to be executed only by theconstituent member; the very purpose of forming a joint venture was to act as aconnecting link between the Irrigation Department and the Joint-Ventureconstituent, and to handover the contract work received from the former to thelatter; the JV never intended to execute any work whatsoever; admission ofgross receipts, in their P&L Account by the JV, was only to transfer the same to their constituent; as no real work was carried on by the assessee, no incomehad accrued to it; and, therefore, credit for TDS was not allowable in the handsof the assessee in terms of Rule 37BA(2)(i) of the Income Tax Rules, 1962 (forshort “the Rules”). After extracting Rule 37BA(2)(i) of the Rules, the assessing authority heldthat TDS credit must be given to the constituent which actually performed andcompleted the work; this was the intention behind the amendment to Rule37BA introduced by the Income Tax (8[th] amendment) Rules, 2011; in a similarcase, the ITAT had held that, unless the assessee joint-venture offered incomefor taxation, TDS credit cannot be given; after its amendment, the scope ofRule 37BA was widened enabling credit of taxes to be extended to the actualpayee in whose hands the income is assessed; and, therefore, the TDS credit,claimed by the assessee, should be disallowed. After extracting Rule 37BA(2)(i) of the Rules, the assessing authority heldthat TDS credit must be given to the constituent which actually performed andcompleted the work; this was the intention behind the amendment to Rule37BA introduced by the Income Tax (8[th] amendment) Rules, 2011; in a similarcase, the ITAT had held that, unless the assessee joint-venture offered incomefor taxation, TDS credit cannot be given; after its amendment, the scope ofRule 37BA was widened enabling credit of taxes to be extended to the actualpayee in whose hands the income is assessed; and, therefore, the TDS credit,claimed by the assessee, should be disallowed. The petitioners preferred appeals thereagainst to the Commissioner ofIncome Tax (Appeals). During the pendency of these appeals, they invokedthe jurisdiction of this Court seeking refund. On being asked how two parallelremedies could be invoked simultaneously, they withdrew the appeals pendingbefore the Commissioner of Income Tax (Appeals), and sought amendment ofthe prayer in the writ petitions to include a challenge to the assessment ordersto the extent they were denied credit for the tax deducted at source. All theapplications, for amendment of the prayer, have been allowed and,consequently, the prayer in these writ petitions now include a challenge to theassessment orders whereby the petitioners were denied the benefit of TDScredit in terms of Rule 37BA(2)(i) of the Rules. S ri S.Ravi, learned Senior Counsel appearing on behalf of thepetitioners, would submit that the petitioners had entered into agreements withthe Government of Andhra Pradesh for execution of works relating to irrigationprojects; they had, in turn, entered into agreements with one of theirconstituents for execution of the work; both the agreements were independentof each other; the Government was not a party to the agreement between thepetitioner-JV and its constituent; likewise the constituent was not a party to theagreement between the Government and the petitioner; distinct andindependent obligations arose under both the contracts; the Government ofAndhra Pradesh was entitled to hold the petitioner alone responsible either fornon-completion or for delay or for improper execution of the work; the Government had deducted tax at source, from the bills payable to thepetitioner, at 1%/2% as stipulated in Section 194C of the Act; the petitioner hadalso deducted TDS, at the very same rates, while making payment to the sub-contractor; both the petitioner and the sub-contractor had filed their respectivereturns of income; while the petitioner had filed a return with “Nil” income, andhad claimed refund of the tax deducted at source from their bills by theGovernment, the sub-contractor had filed their return of income, and hadclaimed credit for the tax deducted at source, from their bills, by the petitioner;the sub-contractor had not sought refund of the tax deducted at source, from thebills of the petitioner, by the Government; there were two independent contractsin existence conferring distinct rights and liabilities on the parties thereto;income, arising out of the amounts received by the petitioner from theGovernment, was liable to be taxed only in their hands; the mere fact that theentire receipts had been transferred to the sub-contractor did not absolve thepetitioner of their statutory obligation of filing their return of income, and forbeing assessed under the Act; as their income was “Nil”, the tax deducted atsource, from their bills, was liable to be refunded to them alone, and not to thesub-contractor; it is not even the case of the department that the sub-contractorhad made any request for such refund; and the intention of the Revenue wasonly to deny refund, of the tax deducted at source from the bills of the petitioner,on some or the other ground. Both Sri B.Narasimha Sarma and Sri T.Vinod Kumar, learned SeniorStanding Counsel for Income Tax, would contend that the joint-venture ismerely a device to route the contract works from the Government to the JVconstituent; no work was executed by the joint venture, and it was the sub-contractor who alone executed the entire work; the entire amount, received bythe petitioner from the Government, was transferred, as it is, to the sub-contractor; and as the entire income, on the works executed for theGovernment, is assessable only in the hands of the sub-contractor, and not thepetitioner, it is the sub-contractor who is entitled to be given credit for the taxdeducted at source by the Government from the bills of the petitioners. As noted hereinabove, the assessing authority relied on Rule 37BA(2)(i)of the Rules to deny the petitioners credit for the tax deducted at source by theGovernment from the amounts paid to them. Rule 37BA(2)(i) of the Rules wasmade in exercise of the powers conferred under Section 199(3) of the Act which enables the CBDT, for the purposes of giving credit in respect of the taxdeducted in terms of the provisions of Chapter XVII of the Act, to make suchrules as may be necessary, including Rules for the purposes of giving credit toa person other than those referred to in Sections 199(1) &(2) of the Act, as alsothe assessment order for which such credit may be given. The powerconferred on the CBDT, under Section 199(3) of the Act, is to make rules forthe purpose of giving credit to a person, other than the person from whoseamounts tax is deducted at source. It is, therefore, necessary to examinewhether or not the Rules made by the CBDT in this regard justify refusal by theassessing authority to give credit, of the tax deducted by the Government fromtheir bills, to the petitioners herein. While examining the applicability of the Rules, it must be borne in mindthat the Rules made by the CBDT, in the exercise of the powers conferredunder Section 199(3) of the Act, must be read harmoniously with all theclauses of Section199 and the other provisions of the Act. It is settled law thatRules, made under the Act, should be interpreted in conformity with theprovisions of the Act (Ispat Industries Ltd. v. Commr. of Customs[[1]]), andnot the other way round. A rule should be read as supplemental to theprovisions of the parent Act. It cannot be interpreted in a manner as to comeinto conflict with the parent Act, in which case the Act will prevail. (STO v. H. Farid Ahmed & Sons[[2]]). A piece of subordinate legislation should be read inthe light of the statutory scheme of the Act. (Bombay Dyeing & Mfg. Co. Ltd. v. Bombay Environmental Action Group[[3]]).Rules made for carrying outthe purposes of the Act cannot be so framed as not to carry out the purposes ofthe Act, and cannot be in conflict therewith, (Laghu Udyog Bharati v. Uniono f India[[4]]). An expression used in a rule must, unless there is anythingrepugnant in the subject or context, have the same meaning as is assigned to itunder the Statute. (Onkarlal Nandlal v. State of Rajasthan[[5]]). Rules shouldbe consistent with the provisions of the Act. (State of U.P. vs. Babu Ram Upadhya[[6]]). A statutory rule cannot enlarge or restrict the meaning of aSection. If a rule goes beyond, or is contrary to, what the Sectioncontemplates, the rule must yield to the Statute. (Central Bank of India v. Workmen[[7]]). It is necessary, therefore, to read Rule 37BA(2)(i) of the Rulesin conformity with Section 194C and 199(1) of the Act. Upadhya[[6]]). A statutory rule cannot enlarge or restrict the meaning of aSection. If a rule goes beyond, or is contrary to, what the Sectioncontemplates, the rule must yield to the Statute. (Central Bank of India v. Workmen[[7]]). It is necessary, therefore, to read Rule 37BA(2)(i) of the Rulesin conformity with Section 194C and 199(1) of the Act. Section 194C of the Act relates to payment to contractors. Under Clause(1) thereof, any person, responsible for paying any sum to any resident forcarrying out any work in pursuance of a contract between the contractor andthe specified person, shall, at the time of credit of such sum to the account ofthe contractor or at the time of payment thereof whichever is earlier, deduct anamount equal to the percentage prescribed in the Section as income tax on theincome comprised therein. In terms of Section 194C(1) of the Act, the personresponsible for paying the sum (in the present case, the Government of AndhraPradesh) to any resident ( i.e the petitioners herein) for carrying out a work inpursuance of a contract between them, deducted tax at source at the time ofpayment of the bills by them to the petitioners herein. Likewise, in compliancewith the requirements of Section 194C of the Act, the petitioners deducted taxat source from the amounts paid by them to the sub-contractors. Section 199 of the Act relates to Credit for tax deductedand, under sub-section (1) thereof, any deduction made in accordance with the foregoingprovisions of Chapter XVII, and paid to the Central Government, shall betreated as a payment of tax on behalf of the person from whose income thededuction was made, or of the owner of the security, or of the depositor or ofthe owner of the property or of the unit-holder, or of the shareholder, as thecase may be. In the present case, deduction of TDS by the Government ofAndhra Pradesh was on behalf of the petitioner, for it is from their income thattax was deducted at source. Section 199(1) of the Act, in the present case,refers to the petitioners alone, and not their constituent i.e the sub-contractors. While Sri T.Vinod Kumar, learned Senior Standing Counsel for IncomeTax, would place emphasis on the words “the person from whose income”,in Section 199(1) of the Act, to contend that the said person is the sub-contractor and not the petitioner, that would require this Court to ignore thesubsequent words “from whose income the deduction was made”. In thepresent case, the deductions were made by the Government from the amountspaid to the petitioner, and no amount was paid by the Government directly tothe sub-contractor. As such the question of deducting tax at source, from theamount payable to the sub-contractor, does not arise. On a reading of Section 199(1) of the Act as a whole, it is evident that the said provision, when appliedto the facts of the present case, refers only to the petitioner, and not to the sub-contractor. 199(1) of the Act as a whole, it is evident that the said provision, when appliedto the facts of the present case, refers only to the petitioner, and not to the sub-contractor. Let us now examine the scope of Rule 37BA(2)(i) of the Rules, andwhether the assessing authority was justified in denying credit of TDS to thepetitioners placing reliance thereupon. While 37BA of the Rules was insertedby the Income Tax (Sixth Amendment) Rules, 2009 with effect from01.04.2009, Sub-rule 2(i) was substituted by the Income Tax (EighthAmendment) Rules, 2011 with effect from 01.11.2011. Rule 37BA(1) stipulatesthat credit for tax deducted at source, and paid to the Central Government inaccordance with the provisions of Chapter XVII, shall be given to the person towhom payment has been made or credit has been given (deductee) on thebasis of information, relating to the deduction of tax, furnished by the deductorto the income tax authority or the person authorised by such authority. It isnot in dispute that the information, relating to deduction of tax at source, hasbeen furnished by the deductor (State Government) to the Income TaxAuthority. It is also not in dispute that the information so furnished refers to thepetitioner as the deductee, and that tax has been deducted at source by theGovernment from their bills alone. As the construction to be placed on Sub-rule 2(i) is in issue, in the present writ petition, it is necessary to extract sub-rule 2(i) of Rule 37BA, and its proviso as it stood before, and after, its amendment. Before its amendment w.e.f. 01.11.2011, Rule 37BA(2)(i) reads thus:- 2(i) If the income on which tax has been deductedat source is assessable in the hands of a personother than the deductee, credit for tax deducted atsource shall be given to the other person in caseswhere – (a)the income of the deductee is included in the totalincome of another person under the provisions ofSection 60, section 61, section 64, section 93 orsection 94;income of another person under the provisions ofSection 60, section 61, section 64, section 93 orsection 94; (b)the income of a deductee being an association ofpersons or a trust is assessable in the hands ofmembers of the association of persons, or in thehands of trustees, as the case may be;persons or a trust is assessable in the hands ofmembers of the association of persons, or in thehands of trustees, as the case may be; (c)the income from an asset held in the name of adeductee, being a partner of a firm of a karta of aHindu undivided family, is assessable as theincome of the firm, or Hindu undivided family, asthe case may be;deductee, being a partner of a firm of a karta of aHindu undivided family, is assessable as theincome of the firm, or Hindu undivided family, asthe case may be; (d)the income from a property, deposit, security, unit or share held in the name of a deductee is ownedjointly by the deductee and other persons and theincome is assessable in their hands in the sameproportion as their ownership of the asset; Provided that the deductee files a declarationwith the deductor and the deductor reports the taxdeduction in the name of the other person in theinformation relating to deduction of tax referred to insub-rule (1) After its amendment w.e.f. 01.11.2011, Rule 37BA (2) (i) reads thus:- (2) (i) Where under any provisions of the Act, thewhole or any part of the income on which tax hasbeen deducted at source is assessable in the handsof a person other than the deductee, credit for thewhole or any part of the tax deducted at source, asthe case may be, shall be given to the other personand not to the deductee : Provided that the deductee files a declarationwith the deductor and the deductor reports the taxdeduction in the name of the other person in theinformation relating to deduction of tax referred to insub-rule (1). After its amendment w.e.f. 01.11.2011, Rule 37BA (2) (i) reads thus:- (2) (i) Where under any provisions of the Act, thewhole or any part of the income on which tax hasbeen deducted at source is assessable in the handsof a person other than the deductee, credit for thewhole or any part of the tax deducted at source, asthe case may be, shall be given to the other personand not to the deductee : Provided that the deductee files a declarationwith the deductor and the deductor reports the taxdeduction in the name of the other person in theinformation relating to deduction of tax referred to insub-rule (1). The pre-amended Rule 37BA(2)(i) was applicable only to the fourcategories of persons referred to therein. As both the learned Senior StandingCounsel for Income Tax place emphasis only on Clause (b), it is unnecessaryfor us to examine the scope of any of the other clauses. The petitioner, a JointVenture, would fall within the ambit of “association of persons” as referred to inClause (b) of Rule 37BA(2). Clause (b), as it then stood, was applicable only incases where the income of the association of persons was assessable in thehands of its members (i.e if the income of the petitioner-JV was assessable inthe hands of its constituent i.e the sub-contractor). In such an event, sub-rule(2)(i)(b) of Rule 37BA required credit, for such tax deducted at source, to begiven to the constituent member of the joint venture. If Clause (b) were to beparaphrased, in the context of the present case, it would require the income ofthe petitioner-joint venture to be assessable in the hands of the sub-contractor. Emphasis is placed by both the learned Senior Standing Counsel forIncome Tax on the word “shall”, in Clause 2(i) of Rule 37BA of the Rules, tocontend that, by its use, the Rule mandates the assessing authority,notwithstanding the claim of the petitioner for credit to be given to them, to givecredit only to the “other person” (sub-contractor), and not to the petitioners. Useof the word “shall”, in Clause 2(i) of Rule 37BA of the Rules, casts an obligation on the assessing authority to give credit, of the tax deducted atsource, to the person in whose hands the income is assessable to tax. In caseit is a person, other than the deductee, then the assessing authority is required,nay bound, to give them credit. The assessing authority cannot refuse to givecredit to the other person, in whose hands the income is assessable to tax,merely because tax was deducted at source from the amounts paid to thedeductee. obligation on the assessing authority to give credit, of the tax deducted atsource, to the person in whose hands the income is assessable to tax. In caseit is a person, other than the deductee, then the assessing authority is required,nay bound, to give them credit. The assessing authority cannot refuse to givecredit to the other person, in whose hands the income is assessable to tax,merely because tax was deducted at source from the amounts paid to thedeductee. As noted hereinabove, in the present case, there are two distinct andindependent contracts. While it does appear that the joint venture wasconstituted only for it to enter into a contract with the Government, and for oneof its constituents to execute the work, the fact remains that there is no privity ofcontract between the Government and the constituent of the JV i.e the sub-contractor. The rights and obligations under the first contract are only that ofthe Government and the petitioner; and those, in the second contract, are onlythat of the petitioner and the sub-contractor. The contractual obligation, toexecute the work for the Government, is that of the joint venture alone, and notthat of the constituent member of the JV i.e the sub-contractor. Any actionwhich the Government of Andhra Pradesh could have taken, for breach of theterms and conditions of the first contract, was only against the petitioner JV andnot its constituent. While the sub-contractor, no doubt, executed the work, theydid so in terms of the second contract entered into between them and thepetitioner-JV. It is evident, therefore, that the contractual receipts under the firstcontract is only that of the petitioner; and the income, arising out of the saidcontract, is assessable only in their hands, and not in the hands of the sub-contractor. The sub-contractor is assessable to tax on their income earned outthe amounts received by them from the petitioner in terms of the secondcontract, and not in terms of the first contract between the Government ofAndhra Pradesh and the petitioner-JV. As noted hereinabove, not only did theGovernment of Andhra Pradesh deduct tax at source from the petitioner’s bills,the petitioner, in turn, while making payment to the sub-contractor, alsodeducted tax at source from the bills of the latter. Credit for the tax deducted atsource, by the petitioner from the bills of the sub-contractor, was given to thesub-contractor as such income was assessable in their hands. Likewise creditfor the tax deducted at source, from the bills of the petitioner, was required tobe given to the petitioner alone as the income, from the contract entered into between them and the Government of Andhra Pradesh, was assessable onlyin their hands, and not in the hands of the sub-contractor. between them and the Government of Andhra Pradesh, was assessable onlyin their hands, and not in the hands of the sub-contractor. The ambit of Clause 2(i) of Rule 37BA of the Rules is restricted by itsproviso. Ordinarily, a proviso is read either as an exception to the substantiveprovision to which it is added, or as restricting the width and amplitude of thesaid provision. The proper function of a proviso is to except, and to deal with acase which would otherwise fall within the general language of the provision,and its effect is confined to that case. It is a qualification of the precedingprovision. Ordinarily, a proviso is not interpreted as stating a general rule.(Haryana State Coop. Land Development Bank Ltd. v. Banks EmployeesUnion[[8]]; Shah Bhojraj Kuverji Oil Mills and Ginning Factory v. SubhashChandra Yograj Sinha[[9]]; Calcutta Tramways Co. Ltd. v. Corpn. ofCalcutt[[10]];A.N. Sehgal v. Raje Ram Sheora[[11]]; Tribhovandas HaribhaiTamboli v. Gujarat Revenue Tribunal[[12]]and Kerala State Housing Boardv . Ramapriya Hotels (P) Ltd[[13]]). A proviso to a particular provision of aStatute/Rule embraces the field which is covered by the said provision. Itcarves out an exception to the provision to which it has been enacted as aproviso, and to no other. (CIT v. Indo-Mercantile Bank Ltd.,[[14]]; Ram NarainSons Ltd. v. Assistant Commissioner of Sales Tax[[15]]). The proper courseis to apply the broad general rule of construction which is that a Section/Rulemust be construed as a whole, each portion throwing light, if need be, on therest. (Tahsildar Singh v. State of U.P.,[[16]]; Dwarka Prasad v. Dwarka DasSaraf[[17]]; Commissioner of Income-tax, Kerala and Coimbatore v. P.Krishna Warriar[[18]]Maxwell on Interpretation of Statutes, 10th Edn., p.162).A proviso cannot be torn apart from the main Section/Rule nor can it beused to nullify or set at naught the real object of the main Section. (S. Sundaram Pillai v. V.R. Pattabiraman[[19]];Craies in his book Statute Law(7th Edn.) It is a fundamental rule of construction that a proviso must beconsidered in relation to the principal matter to which it stands as a proviso. It isto be construed harmoniously with the main enactment. (Abdul Jabar Butt v.State of Jammu & Kashmir[[20]];Indo-Mercantile Bank Ltd.,[14]; Ram Narain Sons Ltd.[15]and State of Punjab v. Kailash Nath[[21]]). The proviso to Rule 37BA (2)(i) requires the deductee to file a declarationwith the deductor, and for the deductor to report the tax deduction, in the nameof the other person, in the information relating to deduction of tax referred to insub-rule (1). In cases where the income is assessable in the hands of aperson, other than the deductee, the proviso to Clause (2)(i) enables thedeductee to file a declaration with the deductor. On such a declaration beingmade, the deductor is required to report the tax deducted at source, not in thename of the deductee but in the name of the other person, in the informationwhich they are required to furnish to the Income Tax Department. It is not evencontended before us, by either of the learned Senior Standing Counsel forIncome-Tax, that the petitioner (deductee) had made any such declaration tothe State Government (deductor), or that the State Government (deductor) hadreported, the tax deducted at source, in the name of the other person (the sub-contractor) to the Income Tax Department. As the proviso restricts the ambit of Rule 37BA(2)(i), it is only in caseswhere the procedure prescribed in the proviso is followed is credit, of the taxdeducted at source, required to given to the person other than the deductee. Inthe present case, as the deductee (the petitioner) claims that credit, for the taxdeducted at source, should be given to them, and not to the sub-contractor,they have justifiably not filed any such declaration with the Government, andthe Government has also not reported, the tax deducted at source, in the nameof the other person, but has reported such deduction only in the name of thedeductee (the petitioner). As the proviso restricts the ambit of Rule 37BA(2)(i), it is only in caseswhere the procedure prescribed in the proviso is followed is credit, of the taxdeducted at source, required to given to the person other than the deductee. Inthe present case, as the deductee (the petitioner) claims that credit, for the taxdeducted at source, should be given to them, and not to the sub-contractor,they have justifiably not filed any such declaration with the Government, andthe Government has also not reported, the tax deducted at source, in the nameof the other person, but has reported such deduction only in the name of thedeductee (the petitioner). Sri T.Vinod Kumar, learned Senior Standing Counsel for Income-Tax,would contend that the amended Rule 37BA of the Rules would applyretrospectively; and it is that Rule which should be applied while examiningwhether credit, for the tax deducted at source, should be given to the petitioner-joint venture or to its constituent i.e. the sub-contractor. Reliance is placed bythe learned Senior Standing Counsel on a Division Bench judgment of this Court, in Commissioner of Income Tax vs. Bhooratnam and Co.[[22]],in thisregard. It is no doubt true that the Division Bench of this Court in Bhooratnamand Co.[22], placing reliance on the judgments of the Supreme Court, in State v. Lateef Hamid & Co.[[23]] of Madras and Tikaram & Sons v. Commissioner of Sales Tax[[24]], held that Rule 37BA is a proceduralprovision dealing with the manner of giving credit, for the tax deducted atsource, for the purposes of Section 199; it applies to pending proceedings also;where a new procedure is prescribed by law, it governs all pending cases;alterations, in the name of procedure, are always retrospective unless there issome good reason why they should not be; and the amendment to Rule 37BA,as introduced by the Income Tax (8[th] Amendment) Rules, 2011, beingprocedural in nature, would have retrospective effect. As it would make nodifference to the case on hand, whether the pre-amended or the amendedClause 2(i) of Rule 37BA of the Rules is applied, we shall proceed on thepremise that the amended Clause 2(i) of Rule 37BA is alone applicable. Theamended Clause 2(i) of Rule 37BA starts with the words “Where under anyprovisions of the Act”. It is only where a specific provision in the Actstipulates that the tax deducted at source is assessable in the hands of aperson, other than the deductee, is credit for the whole, or any part, of the taxdeducted at source required to be given to the other person, and not to thedeductee. We have not been shown any such provision in the Act whichrequires the whole, or any part of the income, on which tax is deducted atsource from the bills of the petitioner-JV, to be assessable in the hands of itsconstituent i.e the sub-contractor. A feeble attempt is made by Sri T.Vinod Kumar, learned Senior StandingCounsel for Income Tax, placing reliance on the petitioner’s own case beforethe Income Tax Appellate Tribunal (for short “ITAT”) in I.T.A.No.1197/Hyd/2011dated 12.07.2012 for the assessment year 2008-09, to contend that theprovision referred to in Rule 37BA(2)(i), which found acceptance with the ITAT,is Section 60 of the Act. Section 60 of the Act relates to transfer of incomewhere there is no transfer of assets and, thereunder, all income, arising to anyperson by virtue of a transfer, whether revocable or not and whether effectedbefore or after the commencement of the Act, shall, where there is no transfer ofthe asset from which the income arises, be chargeable to income tax as theincome of the transferor, and shall be included in his total income. Section 60of the Act applies to cases where an asset belongs to one person, while theincome arising from such an asset is claimed to be the income of another. In such cases, Section 60 of the Act requires the income from such an asset to betreated as the income of the owner of the asset alone, and to be included in histotal income. Section 60 of the Act has no application to the facts of thepresent case, for it is not even the case of the Revenue that, while retaining anasset, the petitioner had transferred the income arising therefrom to the sub-contractor. The assessing authority has clearly misconstrued Rule 37BA(2)(i)of the Rules in holding that the petitioner is not entitled to claim credit for thetax deducted at source, by the Government, from their bills. Before parting with the case, we must also take note of the fact that theparties before us appear to have raised contentions to the contrary before theITAT in I.T.A.No.1197/Hyd/2011 for the assessment year 2008-09. While theRevenue’s contention before the ITAT was that the petitioner was liable to taxfor the income received by them from the Government, for the works executedby the sub-contractor, the petitioner herein had contended that it was the sub-contractor who should be subjected to tax on the income received from theGovernment, as it is they who had executed the works. Sri S.Ravi, learnedSenior Counsel appearing on behalf of the petitioners, would, as anexplanation to the apparent contradiction, submit that the issue before the ITATwas regarding the person in whose hands the income was to be subjected totax, and the question as to who was entitled to be given credit, for the taxdeducted at source, did not arise for consideration therein. Learned SeniorCounsel would point out that, in the appeal before the ITAT, the joint-venturewas sought to be assessed to tax on an estimation of their profits, though theconstituent sub-contractor had also been assessed to tax. On the other handSri T.Vinod Kumar, learned Senior Standing Counsel for Income Tax, wouldsubmit that their contention to the contrary before the ITAT notwithstanding, theassessing authority, in the present cases, had merely followed the order of theITAT in the appeal relating to an earlier assessment year. This submission ofthe learned Senior Standing Counsel for Income Tax does not meritacceptance as the assessment orders, in the present batch of writ petitions,make no reference to the order of the ITAT. As the order of the ITAT, for the assessment year 2008-09, has attainedfinality, it would be wholly inappropriate for us to re-appreciate the findingsrecorded therein or examine the validity of its conclusions. While it doesappear that the parties before us had earlier taken an opposite stand before the ITAT, it cannot also be lost sight of that the question, which fell forconsideration in the appeal before the ITAT, was whether the petitioner couldhave been assessed to tax, estimating the profits they had made from thecontract, when the entire amount received by them from the Government hadbeen transferred to the sub-contractor. The scope of Rule 37BA of the Rulesdid not arise for consideration therein. In any event, any declaration of law bythe ITAT would not bind this Court. It is wholly unnecessary for us, therefore, todwell on this aspect any further. ITAT, it cannot also be lost sight of that the question, which fell forconsideration in the appeal before the ITAT, was whether the petitioner couldhave been assessed to tax, estimating the profits they had made from thecontract, when the entire amount received by them from the Government hadbeen transferred to the sub-contractor. The scope of Rule 37BA of the Rulesdid not arise for consideration therein. In any event, any declaration of law bythe ITAT would not bind this Court. It is wholly unnecessary for us, therefore, todwell on this aspect any further. On being asked how the Revenue could retain the amount representingthe tax deducted at source from the petitioners’ bills, and not pay it either to thepetitioner or to the sub-contractor, Sri T.Vinod Kumar, learned Senior StandingCounsel for Income Tax, would submit that, as the income is assessable in thehands of the sub-contractor, it is they, and not the petitioner, who can claimcredit and, whenever any such claim is made, the Department would give themcredit for the TDS, and refund the amount in accordance with Rule 37BA of theRules. It is, however, not in dispute that the sub-contractor has not made anyclaim for being given credit for the tax deducted at source by the Governmentfrom the bills of the petitioner herein. It is not as if there were conflicting claimsby the petitioner-JV on the one hand, and its constituent sub-contractor on theother, both seeking credit for the tax deducted at source by the Government,necessitating retention of these amounts by the Revenue till resolution of theconflicting claims. As held by the Division Bench of this Court, in Bhooratnamand Co.[24],the Revenue cannot be allowed to retain the amounts representingthe tax deducted at source without credit being given to anybody. If credit oftax is not allowed to the petitioner-assessee, and the sub-contractor has notmade any claim for refund, it would result in credit of the TDS not being takenby anybody and this, as has been rightly pointed out by the Division Bench inBhooratnam and Co.[22], is not the spirit and the intention of the law. To the limited extent the assessing authority denied credit to thepetitioner, for the tax deducted at source from their bills by the Government, theimpugned assessment orders/rectification orders are set aside. The assessingauthority shall determine the quantum of credit for TDS which the petitionersare entitled to in terms of this order, and refund the amount so computed to thepetitioners herein in accordance with law. The entire exercise, culminating in final orders being passed, shall be completed within a period of three monthfrom the date of receipt of a copy of this order. It is made clear that this ordershall not preclude the assessing authority, if he so chooses, from reopening theassessments, and in passing orders thereafter in accordance with Sections147 and 148 of the Act. All the writ petitions are disposed of accordingly. The miscellaneouspetitions pending, if any, shall also stand disposed of. There shall be no orderas to costs. _____________________________ RAMESH RANGANATHAN, J Date:29.02.2016 ___________________________________ M. SATYANARAYANA MURTHY, J Note: L.R.Copy to be marked. B/o JSU THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN AND THE HON’BLE SRI JUSTICE M.SATYANARAYANA MURTHY Writ Petition Nos. 31680, 31681, 31740, 31741, 31748, 31763, 42408, 42489,42657, 42666, 42667, 42678, 43038, 43069 & 43078 of 2015 JSU Date:29.02.2016 [1] (2006) 12 SCC 583 [2](1976) 1 SCC 245 [3](2006) 3 SCC 434 [4](1999) 6 SCC 418 [5](1985) 4 SCC 404[6]AIR 1961 SC 751 [7](1960) 1 SCR 200 [8](2004) 1 SCC 574 [9](1962) 2 SCR 159[10]AIR 1965 SC 1728 [11]AIR 1991 SC 1406[12]AIR 1991 SC 1538[13](1994)5 SCC 672[14]1959 Supp (2) SCR 256 [15](1955) 2 SCR 483[16]1959 Supp (2) SCR 875[17](1976) 1 SCC 128[18]AIR 1965 SC 59[19](1985) 1 SCC 591[20]AIR 1957 SC 281[21](1989) 1 SCC 321[22](2013) 357 ITR 396 (AP)[23]AIR 1972 SC 1781[24]AIR 1968 SC 1286