Tax Case v. Assistant Commissioner Of Income Tax, Circle-I, Bhilai, Chhattisgarh

HIGH COURT OF CHHATTISGARH, BILASPUR NAFR Tax Case No.8 of 2012 Smt. Madhu Soni, Prop. Bhilai Builders, 6/36, Sanichari Bazar, Durg,Chhattisgarh. ---- Appellant versus Assistant Commissioner of Income Tax, Circle-I, Bhilai, Chhattisgarh. ---- Respondent For Appellant For Respondent : Shri Neelabh Dubey, Advocate: Ms. Naushina Ali, Advocate Hon'ble Shri Navin Sinha, Chief JusticeHon'ble Shri Justice P. Sam Koshy Judgment on Board Per Navin Sinha, Chief Justice 1/9/2015 1. The present appeal arises from order dated 22.1.2010 of the IncomeTax Appellate Tribunal, Bilaspur Bench, rejecting C.O. No.30/BLPR/09 forthe Assessment Year 2006-07. Tax Appellate Tribunal, Bilaspur Bench, rejecting C.O. No.30/BLPR/09 for 2.The questions of law framed while admitting the appeal are as follows: “(1) Whether a builder can be said to beinvolved in the construction of a building fulfillingthe requirement of the words 'Civil Construction' inthe Explanation to Section 44AD? (2) Whether the words 'Civil Contractor' canbe read into Section 44AD when the Legislaturehas used the words 'Civil Construction' and not'Civil Contractor'?” 3.The Appellant is the proprietor of M/s Bhilai Builders. Return of income tax was filed on 28.3.2007. Pursuant to survey under Section 133Aof the Income Tax Act, 1961 (hereinafter referred to as “the Act”) her case was selected for scrutiny leading to notice under Section 143(2) of the Act.The Assessing Officer held that the Appellant was a builder and notcontractor and thus not entitled to benefit of Section 44AD of the Act makingaddition of gross profit @37%. The CIT (A) reversed the view holding thatthere was no difference between a civil contractor and constructor underSection 44AD restricting the addition to 16% gross profits. The Tribunal heldthat the Appellant was not a civil contractor but a landdeveloper/promoter/builder, approving restriction of gross profits at 16%. 4.It is appropriate to set out Section 44AD in the relevant extract for thepurpose of the present controversy :- “44AD.Special provision for computingprofits and gains of business of civilconstruction, etc.–(1) Notwithstanding anythingto the contrary contained in sections 28 to 43C, inthe case of an assessee engaged in the businessof civil construction or supply of labour for civilconstruction, a sum equal to eight per cent of thegross receipts paid or payable to the assessee inthe previous year on account of such business or,as the case may be, a sum higher than theaforesaid sum as declared by the assessee in hisreturn of income, shall be deemed to be the profitsand gains of such business chargeable to taxunder the head “Profits and gains of business orprofession”: Provided that nothing contained in thissub-section shall apply in case the aforesaid grossreceipts paid or payable exceed an amount of fortylakh rupees. ….. Explanation.–For the purpose of this section, the–expression “civil construction” includes (a) the construction or repair of any building,bridge, dam or other structure or of any canal orroad; (b) the execution of any works contract.” sought to be drawn by the Tribunal between a civil contractor and a landdeveloper/builder/promoter is not sustainable in view of the clear languageof Section 44AD read with the Explanation. In a taxing statute, the languageof which is clear, the Tribunal could not have read into it words not providedby the Legislature. If the Legislature intended to exclude adeveloper/builder/promoter, it would have provided so in the statute itself.Once the CIT (A) held that the Appellant was a civil contractor relief ought tohave been granted under Section 44AD of the Act at 8% gross profit. (a) the construction or repair of any building,bridge, dam or other structure or of any canal orroad; (b) the execution of any works contract.” sought to be drawn by the Tribunal between a civil contractor and a landdeveloper/builder/promoter is not sustainable in view of the clear languageof Section 44AD read with the Explanation. In a taxing statute, the languageof which is clear, the Tribunal could not have read into it words not providedby the Legislature. If the Legislature intended to exclude adeveloper/builder/promoter, it would have provided so in the statute itself.Once the CIT (A) held that the Appellant was a civil contractor relief ought tohave been granted under Section 44AD of the Act at 8% gross profit. 6.Learned Counsel for the Respondent submitted that there will be adistinction between a person engaged in a civil construction and a landdeveloper/builder/promoter, who does the work on account of the clients. Nobooks of accounts were maintained and valuer's report was also obtainedwith regard to the investment and construction raised by the Appellant. 7.Reliance was further placed on an order in (2014) 42 Taxmann.com436 (Kerala) (Touch Home Builders and Realtors (P.) Ltd. v. DeputyCommissioner of Income Tax, Central Circle, Trivandrum) in support of thesubmission of distinction between a civil contractor and a builder. 8.We have considered the submissions, the statutory provisions, andthe questions of law framed. The orders of the Assessing Officer, theCommissioner of Income Tax (Appeals) and the Tribunal have also beenconsidered by us. 9. The Assessing Officer sought to draw a distinction between acontractor and a builder. The CIT (A) disagreeing held that there is nodistinction between a civil contractor and a constructor under Section 44AD.The Tribunal reverted back to the Assessing Officer for drawing a distinctionbetween a civil contractor and a land developer/builder/promoter. engaged in the business of civil construction. It then creates a fiction that forsuch assessee 8% shall be deemed to be gross profit chargeable to taxunless gross receipt paid or payable exceeded forty lakhs of rupees which isnot the case presently. 11.The Explanation to Section 44AD provides that “civil construction” will“include” construction of any building. In other words, if an assessee isengaged in the business of civil construction and which expression includesconstruction of any building we see no reason why it will not include theconstruction of a building by a land developer/builder/promoter. The provisoto Section 44AD carves out an exception when the deeming fiction will notapply. Touch Home Builders and Realtors (supra) relied upon by theRespondent does not contain any analysis of the provisions of Section44AD read with the Explanation. 12.Considering the meaning of the word “includes” in (1971) 3 SCC550 (CIT v. Taj Mahal Hotel) it was observed as follows :- “6…..The word “includes” is often used in interpretationclauses in order to enlarge the meaning of the words orphrases occurring in the body of the statute. When it isso used, those words and phrases must be construed ascomprehending not only such things as they signifyaccording to their nature and import but also those thingswhich the interpretation clause declares that they shallinclude….” 13. A taxing statute has to be interpreted literally by giving meaning andeffect to every word in the Act. The language of the Section read with theExplanation admits of no ambiguity. If the Legislature did not provide forexclusion of a land developer/builder/promoter from the definition of civilconstruction, nothing can be added, incorporated or inserted by adding to itwhich may amount to changing the language of the provision and theintention of the Legislature itself. CIT) it was observed as follows : - 13. A taxing statute has to be interpreted literally by giving meaning andeffect to every word in the Act. The language of the Section read with theExplanation admits of no ambiguity. If the Legislature did not provide forexclusion of a land developer/builder/promoter from the definition of civilconstruction, nothing can be added, incorporated or inserted by adding to itwhich may amount to changing the language of the provision and theintention of the Legislature itself. CIT) it was observed as follows : - “9….The duty of the Court is to interpret the words thatParliament has used, it cannot supply the gap disclosedin an Act or to make up the deficiencies. “If”, said LordBrougham, in Gwynne v. Burnell, we depart from theplain and obvious meaning on account of such views (asthose pressed in Argument on 43 Geo. 8, c. 99) we donot in truth construe the Act, but alter it. We add words toit, or vary the words in which its provisions are couchedto supply a defect which the Legislature could easilyhave supplied, and are making the law, not interpretingit”. 15. The discussion and consideration by the Assessing Officer, theCIT (A) though in favour of the Assessee, and the Tribunal is cryptic andessentially leaves crucial issues undecided by proceeding on certainassumptions not borne out by the statutory provisions. 16.The impugned order dated 22.1.2010 in its present form is held to beunsustainable and is set aside. The matter is remanded to the Tribunal forfresh consideration and decision in accordance with law. 17.The appeal is allowed. Sd/- (Navin Sinha) CHIEF JUSTICE Sd/- (P. Sam Koshy) JUDGE