INCOME TAX
INSTRUCTION NO. 1892/1992
Dated: March 21, 1992
Section(s) Referred: 44AC
Statute: Income - Tax Act, 1961
The Andhra Pradesh High Court in the case of M/s. A. Sanyasi Rao vs. Govt of Andhra Pradesh & others(178 ITR 31) has held that the non-obstante clause in section 44AC(1) of the I.T.Act-"notwithstanding any thing to the contrary contained in sections 28 to 43 C would be confined to the limited purpose of sustaining the tax collection at source provided for in section 206C. It was further held that after the tax is collected in the manner provided in section 206C, a regular assessment would be made in accordance with sections 28 to 43C. It was concluded that, read down in this manner, section 44AC does not suffer from any constitutional infirmity. Similar judgments have also been given by certain other High Courts. These judgments have not been accepted by the Board and appeals against these judgments are being filed in the Supreme Court.
2. The Kerala High court in the case of M/s. T. K. Aboobacker and others vs. UOI & others(177 ITS 358) and P. Kunhammed Kutty Haji & Others(176 ITR 481) has, however, held that section 44AC and section 206C do not transgress the legislative field assigned to Parliament, and are, therefore, valid.
3. In view of these conflicting judgments the Board has decided that where a judgment of the jurisdictional High court is available, the assessment would be framed in accordance with the law laid down in the judgment. However, where the jurisdictional High Court has decided that the assessment is not to be made on the basis of presumptive rate of profit specified in section 44AC, the assessment order u/s.143(3) may be passed on the following lines:
"According to the I.T.Act, income in this case was to be computed by applying the presumptive rate of profit specified in section 44AC. However, the Hon'ble High court has held in the case of....... that the income should instead be computed by applying the provisions of sections 28 to 43C. The decision of the High Court is in appeal before the Supreme Court. Pending the outcome of appeal before the Supreme Court in deference to the judgment of the High Court, the assessment is framed as under".
4. In cases where there is no decision of the jurisdictional High Court the income may be computed by applying the provisions of section 44AC and a reference may also be made to the judgments of the Kerala High court referred to in para 2 above.
5. Certain other cases have also come to the notice of the Board where the High Court has stayed the operation of section 44AC. In such cases the assessment would have to be framed in accordance with the directions given in the stay order. It may be noted that the extended time for completion of assessment under Explanation I(ii) to section 153(3) will be available only in cases where the stay is in respect of assessment proceedings and not in respect of operation of section 44AC.
6. These instructions would be applicable only for completion of time-barring assessments as efforts are being made to get a stay order/decision in the matter from the Supreme Court. The A.O's will also maintain a register in which all such cases would be entered where the assessment could have been completed by applying the provisions of section 44AC but for the decision of the jurisdictional High Court, so that immediate action can be taken to rectify such assessments after the Supreme Court has adjudicated upon the matters.