Allahabad High Court
Dey'S Medical (U.P.) (P) Ltd. vs Union Of India (Uoi) And Ors. on 15 February, 2008
Equivalent citations: (2008)216CTR(ALL)83
Bench: Sushil Harkauli, Sudhir Agarwal
JUDGMENT
1. Heard learned Counsel for the parties.
2. The petitioner is challenging the assessment order dt. 31st Dec, 2007 (Annex. 5 to the writ petition) passed by Jt. CIT, Range-II, Allahabad, under Section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the 'Act') for the asst. yr. 2005-06 insofar as it has fastened the liability of tax of Rs. 1,29,10,775 upon the petitioner. He has also challenged the vires of Section 40(a)(ia) of the Act.
3. The petitioner is engaged in the business of manufacture and sale of cosmetics and medical products having its unit at Allahabad. With respect to some advertisements made by M/s Dey's Medical Stores Manufacturing Ltd., the petitioner claims to have made certain payments being his share of expenditure towards advertisement but the said payments were made without deducting tax at source though mandated under Section 194C of the Act. For failure of deduction of tax at source, the amount paid by the petitioner claimed to be expenditure on account of advertisement was not allowed to be deducted from computation of his income in view of Section 40(a)(ia) of the Act and the AO treated the said payment to be the income of the petitioner fastening upon him the liability of tax under the Act.
4. The learned Counsel for the petitioner contended that the aforesaid payment is also liable to be taxed in the hands of the persons to whom the payments are made being their income and TDS on such amount by the petitioner at best would have been in the nature of part payment of tax by such person. Therefore, for such failure of deduction of tax at source, the said payment in its entirety cannot be treated to be the income of the petitioner as it would amount to double taxation of the same amount and, therefore, is illegal and ultra vires.
5. However, we do not find any substance in the submission and in our view, the argument is thoroughly misconceived.
6. Section 4 of the Act provides that for the income of the year concerned, income-tax shall be charged in accordance with the provisions enacted by the legislature. The income is defined under Section 2(24) of the Act. However, in several provisions, the income which is not to be included in total income or is liable to be deducted therefrom has been provided in detail. It is only such amount, deduction whereof is permissible under the Act has to be excluded from computation of total income for the year, which is chargeable to tax under the Act. Amounts spent towards business expenditure are deductible under Section 37 of the Act in general. However, Section 40 provides for certain amounts, which are not deductible in computing the income chargeable under the Act. A sum paid for advertisement towards advancement of the business is liable to be deducted from computation of the total income strictly in accordance with the provisions of the Act and not otherwise. It is not disputed that on the payments made by the petitioner, which are in dispute in the present case, he was liable to deduct tax at source by virtue of Section 194C of the Act failing which Section 40(a)(ia) provides that such payment shall not be allowed to be deducted from computation of total income and shall be treated to be the income of the assessee. Once a deduction of a particular amount is not allowable under the Act, it is liable to be taxed and merely because some other person may also be liable to tax after receiving the said amount in one or the other manner, it cannot be said that former assessee is entitled for exemption and cannot be taxed. We are not shown of any authority providing that such taxation is not permissible in law and is bad even otherwise.
7. Moreover, despite our repeated query, the learned Counsel for the petitioner could not show as to how and in what manner he claims Section 40(a)(ia) of the Act to be ultra vires. He could not show any legislative incompetence in enacting such provision. Vires of an statute can be challenged on the ground of legislative incompetence. We are not shown that Section 40(a)(ia) of the Act is not within the legislative competence of the Parliament and further learned Counsel for the petitioner also could not show that the said provision, in any manner, is violative of any provision of the Constitution including fundamental rights.
8. We, therefore, do not find any merit in this writ petition. It is, accordingly dismissed.
9. No order as to costs.