RAVIRAJ RELAMPADDU, MUMBAI V. ACIT CIR 23(1), MUMBAI

CO 157/MUM/2012

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9284 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 03-01-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 13-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 09-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: C N VAZE
• Keywords: Business income; Depreciation; Non-deduction of tax

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUM BAI . . , , BEFORE SHRI B. R. MITTAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 6449/MUM/2011 ( / ASSESSMENT YEAR: 2008-09) ASST. CIT-23(1), ROOM NO.108, C-10, 1 ST FLOOR, B.K.C, BANDRA (E), MUMBAI-400 051 / VS. RAVIRAJ RELEMPAADU, 2 ND FLOOR, R. NO.2, SAI BAUG, VILLAGE ROAD, BHANDUP (W), MUMBAI-400 078 ! ./' ./PAN/GIR NO. AFDPR 4214 B ( !# /APPELLANT ) : ( $!# / RESPONDENT ) & $ ./ C.O. NO. 157/MUM/2012 (ARISING OUT OF ITA NO. 6449/MUM/2011) ( / ASSESSMENT YEAR: 2008-09) RAVIRAJ RELEMPAADU, 2 ND FLOOR, R. NO.2, SAI BAUG, VILLAGE ROAD, BHANDUP (W), MUMBAI-400 078 / VS. ASST. CIT-23(1), ROOM NO.108, C-10, 1 ST FLOOR, B.K.C, BANDRA (E), MUMBAI-400 051 ! ./' ./PAN/GIR NO. AFDPR 4214 B ( $/ CROSS OBJECTOR ) : ( $!# / RESPONDENT ) % & ' / REVENUE BY : SHRI SANJEEV JAIN ()*+ & ' / ASSESSEE BY : SHRI C. N. VAZE , (%- & . / DATE OF HEARING : 14.11.2013 /01 & . / DATE OF PRONOUNCEMENT : 03.01.2014 2 ITA NO.6449/MUM/2011 & CO NO.157/MUM/2012 RAVIRAJ RELEMPADDU (A.Y. 2008-09) 2 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE AND THE CROSS OBJE CTION (C.O.) BY THE ASSESSEE, ARISING OUT OF THE ORDER BY THE COMMISSIONER OF INC OME TAX (APPEALS)-33, MUMBAI (CIT(A) FOR SHORT) DATED 07.07.2011, PARTLY ALLOW ING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER) DATED 29.12.2010 FOR THE ASSESSMENT YEAR (A.Y.) 2008-09. 2.1 IT WOULD BE RELEVANT, BEFORE WE PROCEED TO TAKE UP THE ISSUES RAISED BY THE RIVAL PARTIES, TO RECOUNT THE BACKGROUND FACTS OF THE CAS E. THE ASSESSEE, AN INDIVIDUAL, IN THE BUSINESS OF CIVIL CONSTRUCTION, UNDER THE TRADE NAM E M/S. RAVIRAJ ENGINEERING CONSTRUCTION, FILED HIS RETURN OF INCOME FOR THE Y EAR ON 15.10.2009 AT A NET INCOME OF RS.22,20,491/-. THE CONTRACT RECEIPTS WERE REFLECTE D AT RS.290.06 LACS, AND AGAINST WHICH A NET PROFIT DISCLOSED WAS AT RS.23.20 LACS, WHICH WORKS TO 8% OF THE FORMER (GROSS RECEIPT). THE TOTAL OF THE ASSETS AS PER THE BALANC E-SHEET (AS AT THE RELEVANT YEAR-END) WAS AT RS.113.21 LACS. HOWEVER, DURING THE COURSE OF VE RIFICATION PROCEEDINGS, COMMENCED WITH THE ISSUE OF NOTICE U/S.143(2) ON 25.09.2010, THE ASSESSEE FURNISHED RE-AUDITED ACCOUNTS, AND WHICH WERE FOUND TO BE AT WIDE, UNEXP LAINED VARIATION WITH THAT SUBMITTED EARLIER. THE GROSS RECEIPTS OF THE BUSINESS STOOD R EFLECTED AT RS.434.65 LACS, WITH A NET PROFIT OF RS.27.02 LACS, AND WHICH WORK TO 6.21%. T HE TOTAL OF THE ASSETS AS PER THE REVISED BALANCE-SHEET WAS AT RS.252.59 LACS. THE OP ENING CAPITAL HAD BEEN ENHANCED FROM RS.14,11,897/- EARLIER TO RS.41,12,069/-. THE ASSES SEE WAS SHOW CAUSED IN RESPECT OF THE SAID DIFFERENCES, AS ALSO FOR THE DECLINED PROFIT R ATE, I.E., W.R.T. THAT DISCLOSED EARLIER. THE ASSESSEE EXPLAINED THAT THE DECLINE WAS ONLY APPARE NT, AND THE PROFIT RATE IN FACT EXHIBITS AN INCREASE, I.E., FROM 8.1% DISCLOSED EARLIER TO 8 .85% AT PRESENT, I.E., WHEN RECKONED PRIOR TO THE CHARGE FOR DEPRECIATION, FURNISHING TH E FOLLOWING FIGURES: 3 ITA NO.6449/MUM/2011 & CO NO.157/MUM/2012 RAVIRAJ RELEMPADDU (A.Y. 2008-09) SR. NO. PARTICULARS ORIGINAL RECASTED A. TURNOVER 2,90,06,135 4,34,64,976 B. NET PROFIT 23,20,491 27,01,502 C. DEPRECIATION 30,784 11,43,314 D. NET PROFIT BEFORE DEPRECIATION 23,51,275 38,44,816 E. NET PROFIT RATIO D/(A)* 100 8.10% 8.85% THE SAME DID NOT, HOWEVER, FIND ACCEPTANCE BY THE A SSESSING OFFICER (A.O.), IN WHOSE VIEW THE PROFIT RATE OF 8%, I.E., AS DISCLOSED EARL IER, WAS A REASONABLE ESTIMATE OF THE ASSESSEES TRADING PROFIT FOR THE YEAR, WORKING THE SAME TO RS.34,77,198/-, I.E., WITH REFERENCE TO THE REVISED TURNOVER. SECONDLY, THE AS SESSEE HAD SUO MOTU DISALLOWED RS.73,05,232/- U/S.40(A)(IA) OF THE ACT IN RESPECT OF NON-DEDUCTION OF TAX AT SOURCE ON ACCOUNT OF PAYMENT MADE ON VARIOUS COUNTS, VIZ. SUB -CONTRACTORS, LABOURS CHARGES, TRANSPORT HIRING CHARGES, PROFESSIONAL FEES AND ACC OUNTING CHARGES. THE SAME WAS RETAINED IN ASSESSMENT. 2.2 IN APPEAL, THE LD. CIT(A), UPON CONSIDERING THE ASSESSEES EXPLANATION, WAS OF THE VIEW THAT THE ADDITION EFFECTED ON THE BASIS OF AND IN VIEW OF THE REVISED FIGURES, FILED SUO MOTU BY THE ASSESSEE, COULD YET ONLY BE IN RESPECT OF T HE COMPARABLE FIGURES. ACCORDINGLY, ONLY THE INCREASE IN THE AMOUNT OF THE OPENING CAPITAL AS PER THE TWO SETS OF ACCOUNTS, I.E., RS.27,00,172/- (RS.41,12,069 - RS.1 4,11,897) WAS HELD BY HIM AS VALID. WITH REGARD TO THE PROFIT ESTIMATION, AGAIN, THE AS SESSEE FOUND FAVOUR WITH HIM. THE ASSESSEE HAD ADMITTED TO THE UNEXPLAINED ADDITION T O ITS CAPITAL ACCOUNT. HOWEVER, APART THERE-FROM, THERE WAS NO BASIS FOR ANY FURTHER ENHA NCEMENT TO THE DISCLOSED INCOME. THE ADDITION ON ACCOUNT OF PROFIT ESTIMATION WAS, ACCOR DINGLY, DELETED. AGGRIEVED, THE REVENUE IS IN APPEAL, WITH THE ASSESSEE, MAKING A C LAIM IN RESPECT OF DISALLOWANCE U/S.40(A)(IA) WITH REFERENCE TO THE DECISION IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ADDL. CIT [2012] 136 ITD 23 (VISHK) (SB) [ALSO 16 ITR (TRIB) 1], PER HIS C.O. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD AND THE CASE LAW CITED. 4 ITA NO.6449/MUM/2011 & CO NO.157/MUM/2012 RAVIRAJ RELEMPADDU (A.Y. 2008-09) 3.1 THE ADDITION OF RS.2,38,47,906/- BY THE A.O. I. E., THE DIFFERENCE BETWEEN THE TOTAL OF THE ASSETS PER THE REVISED BALANCE-SHEET (AS AT 31/3/2008) AND THE OPENING CAPITAL AS ON 01.04.2007 (AS PER THE BALANCE-SHEET FILED ORIGINAL LY), IS WITHOUT BASIS. THE ASSETS, ALONG WITH THEIR NATURE AND SOURCE, STAND DISCLOSED BY TH E ASSESSEE PER ITS REVISED BALANCE-SHEET, SO THAT UNLESS SOME FURTHER ASSETS STAND FOUND OR, IN ANY CASE, THE SOURCE OF THE INVESTMENT REFLECTED PER THE ASSESSEES BOOKS FOUND FALSE OR INCORRECT, NO ADDITION COULD BE VALIDLY MADE. THE LD. CIT(A) HAS RIGHTLY RESTRIC TED THE ADDITION TO THE ADMITTED INCREASE IN THE OPENING CAPITAL, TOWARD WHICH NO SA TISFACTORY EXPLANATION STANDS FURNISHED BY THE ASSESSEE. 3.2 AGAIN, THERE IS NO BASIS FOR NOT ACCEPTING THE REVISED TRADING RESULT. THE SAME COULD ONLY BE UNACCEPTABLE WHERE THE ACCOUNTS ARE S HOWN TO EXHIBIT SOME FUNDAMENTAL DEFECT. RATHER, AS WE OBSERVE, THE ONLY BASIS TOWAR D THE SAME IS THE PROFIT FIGURE AS PER THE ORIGINAL RETURN, AND WHICH HAS BEEN SHOWN AS BE ING NOT UNFAVOURABLE WHEN THE DEPRECIATION CHARGE IS ALSO TAKEN INTO ACCOUNT. THE REFERENCE TO THE FIGURES AS PER THE ORIGINAL RETURN CANNOT BE THE BASIS OF ADDITION; TH E SAME HAVING BEEN IN FACT DENOUNCED BY THE ASSESSEE HIMSELF AS ALSO CONSIDERED UNRELIABLE BY THE REVENUE. THERE IS ALSO NO REFERENCE TO ANY BASIS OR OTHER COMPARABLE DATA BY THE REVENUE. UNDER THE CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE DELETION OF THE ADDITION MADE ON ACCOUNT OF ESTIMATION OF INCOME ON TRADING ACCOUNT, AND THE SA ME IS ACCORDINGLY CONFIRMED. 4. VIDE ITS CROSS OBJECTION, THE ASSESSEE PRESSES F OR THE RESTRICTION OF THE DISALLOWANCE U/S. 40(A)(IA) TO RS. 34,35,611/-, THE AMOUNT CLAIM ED AS OUTSTANDING FOR PAYMENT AS AT THE YEAR-END AND, THUS, PAYABLE AS ON 31/3/2008, PLACIN G RELIANCE ON THE DECISION IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA), READING THE WORD PAYABLE OCCURRING IN THE PROVISION TO READ OR CONVEY PAYABLE AS AT THE END OF THE RELEVANT PREVIOUS YEAR . THE SAME, WE MAY FIRSTLY CLARIFY, COULD BE PRESSED IN V IEW OF THE CLAIM BEING ESSENTIALLY LEGAL, SO THAT THE SAME, WHERE CONSIDERED VALID, COULD BE CONFIRMED FOR ALLOWANCE SUBJECT TO THE 5 ITA NO.6449/MUM/2011 & CO NO.157/MUM/2012 RAVIRAJ RELEMPADDU (A.Y. 2008-09) SUM UNDER REFERENCE BEING VERIFIED FOR BEING AND/OR RESTRICTED TO THE AMOUNT OUTSTANDING AS AT THE YEAR-END. 4.1 WE SHALL, BEFORE EMBARKING ON THE CASE LAW; THE ASSESSEES CASE BEING BASED ON THE DECISION BY THE SPECIAL BENCH OF THE TRIBUNAL IN MERILYN SHIPPING & TRANSPORTS (SUPRA), DWELL ON THE PROVISION, WHICH READS AS UNDER: AMOUNTS NOT DEDUCTIBLE. 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN S ECTIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION, ( A ) IN THE CASE OF ANY ASSESSEE ( I ) .. ( IA ) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROY ALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDIN G SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BE EN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID, (A) IN A CASE WHERE THE T AX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR , ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139; OR (B) IN ANY OTHER CASE, ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEAR: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCT ED (A) DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE SAID DUE DATE; OR (B) DURING ANY OTHER MONT H OF THE PREVIOUS YEAR BUT PAID AFTER THE END OF THE SAID PREVIOUS YEAR, SUCH SUM SHALL BE ALLOWED AS A DEDUCTIO N IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS B EEN PAID. EXPLANATION .. [EMPHASIS, BY UNDERLIN ING, OURS] 6 ITA NO.6449/MUM/2011 & CO NO.157/MUM/2012 RAVIRAJ RELEMPADDU (A.Y. 2008-09) A FAIR LOOK AT THE PROVISION MAKES IT MANIFESTLY CL EAR THAT ANY SUM WHICH IS PAYABLE TO SPECIFIED PERSONS AGAINST SPECIFIED SERV ICES ON WHICH TAX IS DEDUCTIBLE AT SOURCE DURING THE PREVIOUS YEAR WOULD, HOWEVER, STA ND TO BE DEDUCTED IN COMPUTING THE INCOME OF THE YEAR ONLY UPON THE DEPOSIT OF THE SAM E, I.E., THE TAX DEDUCTIBLE AT SOURCE, BY THE SPECIFIED DATE. THE DISALLOWANCE IS NOT ABSOLUT E, SO THAT A DEPOSIT THEREOF BEYOND THE SPECIFIED DATE WOULD ENTITLE DEDUCTION OF THE PRINC IPAL SUM IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH TAX IS PAID. THERE IS NO WARRANT IN THE LANGUAGE OF THE PROVISION TO LIMIT THE WORD PAYABLE WITH REFERENC E TO ANY PARTICULAR DATE DURING THE PREVIOUS YEAR, AS, FOR EXAMPLE, THE YEAR-END. THE T AX DEDUCTIBILITY AT SOURCE COULD ARISE AT ANY TIME DURING THE YEAR ON ACCOUNT OF A LIABILITY ARISING DURING THE YEAR, AND WHICH IS SO IRRESPECTIVE OF WHETHER PAYMENT IN ITS RESPECT IS M ADE OR NOT. ACCORDINGLY, THE DEDUCTION QUA THE SAID LIABILITY WOULD BE SUBJECT TO DEPOSIT OF THE TAX DEDUCTIBLE AT SOURCE IN ITS RESPECT BY THE SPECIFIED DATE/S. THIS, IN NUTSHELL, IS THE PROVISION. THE PROVISION ITSELF PRESCRIBES DIFFERENT TIME FRAM ES FOR THE DEPOSIT OF TAX DEDUCTIBLE AT SOURCE SO AS TO QUALIFY THE PRINCIPAL AMOUNT FOR DEDUCTION, I.E., SEPARATELY FOR TAX DEDUCTIBLE DURING THE LAST MONTH OF THE YEAR AND THAT DURING THE OTHE R PART OF THE PREVIOUS YEAR, AND WHICH WOULD MAKE IT ABUNDANTLY C LEAR THAT THE PROVISION CONTEMPLATES DEPOSIT OF TAX DEDUCTIBLE AT SOURCE AT ANY TIME DUR ING THE YEAR FOR THE CORRESPONDING PRINCIPAL AMOUNT TO QUALIFY FOR DEDUCTION, WHICH ST ANDS THUS COVERED THEREBY. THE DIFFERENT TIME FRAMES FOR THE DEPOSIT OF TDS BECOME MEANINGFUL WHEN CONSIDERED IN THE BACKGROUND AND CONTEXT OF THE FACT THAT THE STATUTE ITSELF PROVIDES DIFFERENT TIME PERIODS FOR THE DEPOSIT OF TAX DEDUCTIBLE AT SOURCE AT DIFF ERENT TIMES DURING THE YEAR, I.E., DURING THE YEAR AND AS AT THE YEAR-END. THE PROVISION WOULD THUS APPLY TO AN AMOUNT PAYABLE AT ANY TIME DURING THE YEAR, AND NOT ONLY TO THAT AS A T THE YEAR-END. THE TRIGGER POINT FOR THE APPLICABILITY OF THE PROVISION, IT WOULD BE NOTED, IS THE TAX AT SOURCE BECOMING DEDUCTIBLE DURING THE YEAR. THE SAME, IT MAY BE APPRECIATED, W OULD ONLY BE ON THE AMOUNT BECOMING PAYABLE AT ANY TIME DURING THE YEAR. THERE IS, AS SUCH, NO BASIS TO SUGGEST OF THE AMOUNT, SINCE PAID, THOUGH SUBJECT TO TAX DEDUCTION AT SOURCE, AND WHICH HAS ADMITTEDLY 7 ITA NO.6449/MUM/2011 & CO NO.157/MUM/2012 RAVIRAJ RELEMPADDU (A.Y. 2008-09) NOT BEEN DEDUCTED, FOR BEING EXCLUDED FROM THE AMBI T OF THE PROVISION, WHICH IS UNAMBIGUOUSLY WORDED. A PAYMENT WOULD, IN FACT, NOT IMPACT EITHER THE DED UCTIBILITY OF THE TAX AT SOURCE IN ITS RESPECT, WHICH WE HAVE EXPLAINED TO BE THE STAR TING POINT FOR THE INVOCATION OF SECTION, OR THE DEDUCTION OF THE AMOUNT (I.E., ON WHICH TAX BECOMES DEDUCTIBLE) IN COMPUTING THE BUSINESS INCOME U/S.28, AND TOWARD WHICH THE DISALL OWANCE U/S.40(A)(IA) WOULD APPLY. THIS IS AS IT IS ONLY THE AMOUNT PAYABLE THAT IS RE LEVANT . WE SAY SO AS WHERE AN AMOUNT IS PAID WITHOUT IT BEING PAYABLE, THE SAME WOULD ONLY BE IN THE NATURE OF AN ADVANCE. ACCORDINGLY, THE SAME WOULD NOT BE ADMISSIBLE FOR D EDUCTION IN THE FIRST PLACE. THE QUESTION OF APPLICABILITY OR OTHERWISE OF SECTION 4 0(A)(IA) WOULD THEREFORE NOT ARISE, WHICH IS APPLICABLE ONLY TO SUMS OTHERWISE DEDUCTIB LE. THIS WOULD ALSO AT ONCE CLARIFY THE USE OF THE WORD PAYABLE IN THE PROVISION AS AGAIN ST THE WORDS CREDITED OR PAID IN THE FINANCE BILL PRECEDING IT. THAT IS, INASMUCH AS THE PAYMENT WITHOUT THE AMOUNT PAID BEING PAYABLE IS OF NO CONSEQUENCE EITHER AS TO ITS DEDUCTIBILITY PER SE OR AS TO ITS DEDUCTIBILITY WITH REFERENCE TO SECTION 40(A)(IA), THE WORD PAID STOOD OMITTED, WITH THE WORD CREDITED BEING PARI MATERIA WITH THE WORD PAYABLE; THE LATTER, RATHER, CONVE YING IT CLEARLY TO BE A LIABILITY QUA A DEDUCTIBLE EXPENSE. THIS, TO OUR MIND, EXPLAINS THE RATIONALE OF THE OMISSION OF THE WORD PAID IN THE ENACTMENT, WHICH THOUGH THE COURTS, AS WE SHALL PRESENTLY SEE, HAVE HELD AS NOT A RELEVANT FACTOR, PARTICULARLY WHERE THE PROVISION IS UNAMBIGUOUS AND CLEARLY WORDED. LASTLY, IT IS TO BE BORNE IN MIND, AS ALSO EMPHASIZ ED BY THE HONBLE COURT IN TUBE INVESTMENTS OF INDIA LTD . VS. ASST. CIT (TDS) [2010] 325 ITR 610 (MAD), THE EFFECT OF THE DISALLOWANCE U/S.40(A)(IA) IS ONLY THAT THE ASSESSE E WOULD STAND TO BE ALLOWED DEDUCTION IN THE YEAR OF PAYMENT OF THE CORRESPONDING TDS. TH E FACT THAT THE TAX WAS DEDUCTIBLE AT SOURCE IN RESPECT OF PAYMENTS MADE DURING THE YEAR, AND WHICH STANDS NOT DEPOSITED, IS ADMITTED. UNDER THE CIRCUMSTANCES, WE DO NOT FIND A NY SUBSTANCE IN THE ASSESSEES CLAIM. 4.2 OUR VIEW, WE ARE CONSCIOUS, IS NOT IN CONSONANC E OF THE DECISION BY THE SPECIAL BENCH OF THE TRIBUNAL IN MERILYN SHIPPING & TRANSPORTS (SUPRA). HOWEVER, THE VIEW OF THE 8 ITA NO.6449/MUM/2011 & CO NO.157/MUM/2012 RAVIRAJ RELEMPADDU (A.Y. 2008-09) SPECIAL BENCH HAS NOT FOUND ACCEPTANCE BY THE HONB LE HIGH COURTS, AS IN CIT VS. CRESCENT EXPORT SYNDICATE [2013] 216 TAXMANN 258 (CAL); CIT VS. SIKANDARKHAN N. TUNVAR [2013] 357 ITR 312 (GUJ); AND TUBE INVESTMENTS OF INDIA LTD . (SUPRA). IN FACT, THE ORDER OF THE SPECIAL BENCH IN MERILYN SHIPPING & TRANSPORTS (SUPRA) HAS ITSELF BEEN STAYED BY THE HONBLE HIGH COURT OF ANDHRA PRADESH. THE HONBLE CALCUTTA HIGH COURT EXAMINED THE SCOPE OF THE PROVISION AT LENGTH IN ITS ELABORATE JUDGMENT IN CRESCENT EXPORT SYNDICATE (SUPRA), CONSIDERING AT LENGTH THE DECISION IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA). THE TRIBUNAL, AS EXPLAINED BY IT, HAD CORRECTLY INTERPRETED THE PROVISION WHEN IT HELD THAT IN CASE OF OMISSION TO DEDUCT THE TAX EVEN THE GENUINE AND ADMISSIBLE EXPE NSES ARE TO BE DISALLOWED. HOWEVER, HAVING DONE THAT, IT REMOVED THE RIGOR OF THE LAW B Y HOLDING THAT THE DISALLOWANCE SHOULD BE RESTRICTED TO THE MONEY WHICH IS YET TO BE PAID, I.E., AS AT THE YEAR-END. IN DOING SO, IT SUPPLIED CASUS OMISSUS , WHICH WAS NOT PERMISSIBLE, ADVERTING TO THE DECIS ION IN THE CASE OF BHUWALKA STEEL INDUSTRIES VS. BOMBAY IRON & STEEL L ABOUR BOARD [2010] 2 SCC 273. IN THE SAID CASE, AS IN THE INSTANT CASE, IT WAS TH E LANGUAGE OF THE ACT, AS OPPOSED TO THAT OF THE BILL THAT WAS RELEVANT, AND IS TO BE INTERPR ETED. THAT IS, THE LANGUAGE OF THE PROVISION, AS FINALLY ENACTED, IS UNAMBIGUOUSLY CLE AR, SO THAT THE INTENTION OF THE LEGISLATURE HAS TO BE GATHERED THERE-FROM. THE HON BLE COURT IN FACT ALSO COMPARED THE PRE-AMENDED AND POST-AMENDED LAW WITH A VIEW TO ASC ERTAINING THE MISCHIEF SOUGHT TO THE RECTIFIED OR THE OBJECT SOUGHT TO BE ACHIEVED B Y THE AMENDMENT, DISCOUNTING THE ARGUMENT THAT TWO REASONABLE VIEWS WERE POSSIBLE, S O THAT ONE FAVOUR TO THE ASSESSEE OUGHT TO BE ADOPTED. IN FACT, THE PROVISION, AS INT ERPRETED BY THE TRIBUNAL, WOULD MAKE IT OTIOSE. THAT A PROVISION MAY OPERATE TO BE HARSH, A S IT INDEED WAS, WAS NO REASON TO STRIKE DOWN OR READ DOWN THE PROVISION, WHICH IS TO BE INT ERPRETED IN TERMS OF THE INTENTION AND THE WILL OF THE LEGISLATURE. THE SAME VIEW STANDS EXPRESSED BY THE HONBLE GUJA RAT HIGH COURT IN TUNVARS CASE (SUPRA), EMPHASIZING ON THE STRICT RULE OF CON STRUCTION FOR INTERPRETATION OF TAXING STATUTES, RELYING ON A NUMBER OF DECISIONS BY THE A PEX COURT. THE PROVISION, IT HELD, WAS IN FACT AMPLY CLEAR. IN PLAIN TERMS IT PROVIDED FOR DI SALLOWANCE OF EXPENDITURE, INCURRED AND 9 ITA NO.6449/MUM/2011 & CO NO.157/MUM/2012 RAVIRAJ RELEMPADDU (A.Y. 2008-09) OTHERWISE ELIGIBLE FOR DEDUCTION, ON THE GROUND THA T THE TAX REQUIRED TO BE DEDUCTED AT SOURCE WAS EITHER NOT DEDUCTED OR, IF DEDUCTED, NOT DEPOSITED BY THE DUE DATE. THE WORD PAYABLE U/S. 40(A)(IA) IS NOT DEFINED, SO THAT IT WOULD NOT INCLUDE THE AMOUNTS PAID. HOWEVER, THERE IS NOTHING TO RESTRICT THE WORD PAY ABLE TO THE SUM/S OUTSTANDING AS AT THE YEAR-END, SO THAT THE PROVISION WOULD STAND TO BE A TTRACTED WHERE THE PRINCIPAL SUM WAS PAYABLE AT ANY TIME DURING THE YEAR, ALSO REFERRING FOR THE PURPOSE TO THE DECISION IN THE CASE OF CIT VS. ASHOKBHAI CHIMANBHAI [1965] 56 ITR 42 (SC), WHEREIN THE APEX COURT HAD CLARIFIED ON THE ACCRUAL OF PROFIT. THE TRIBUNA L, IN ITS VIEW, HAD COMMITTED AN ERROR IN APPLYING THE PRINCIPLE OF CONSCIOUS OMISSION. IN FA CT, THE INTERPRETATION SUGGESTED BY IT IS SANS ANY LOGIC, AND WOULD BRING IN ITS WAKE IRRECONCILA BLE AND DIVERSE CONSEQUENCES. THE WORD PAYABLE THUS HAS TO BE READ WITHOUT ANY REST RICTION, AND WOULD EXTEND TO ANY AMOUNT PAYABLE AT ANY TIME DURING THE YEAR. AS IN T HE CASE OF CRESCENT EXPORT SYNDICATE (SUPRA), IT HELD THAT THE TRIBUNAL FELL IN SERIOUS ERROR IN COMPARING THE LANGUAGE USED IN THE DRAFT BILL AND THAT IN THE FINAL ENACTMENT TO ASSIG N A PARTICULAR MEANING TO THE STATUTORY PROVISION, ALSO REFERRING TO AND QUOTING FROM THE D ECISION IN THE CASE OF BHUWALKA STEEL INDUSTRIES (SUPRA). THE TRIBUNAL, IN ITS VIEW, HAD COMMITTED A N ERROR IN APPLYING THE PRINCIPLE OF CONSCIOUS OMISSION (PG.329). TO THE SAME EFFECT IS THE OBSERVATION OF THE HONBL E COURT IN TUBE INVESTMENTS OF INDIA LTD. (SUPRA), UPHOLDING THE VIRES OF THE PROVISION, CLEA RLY STATING THAT THERE IS NO AMBIGUITY IN THE PROVISION AND, THEREFORE, CANNOT B E READ DOWN. THE SAME WAS IN FACT HEAVILY RELIED UPON BY THE DISSENTING MEMBER IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA), EVEN AS NOTED BY THE HONBLE COURT IN TUNVARS CASE (SUPRA). WE DO OBSERVE THAT THE HONBLE ALLAHABAD HIGH COU RT IN CIT VS. VECTOR SHIPPING SERVICES [2013] 85 CCH 201 (ALL) (COPY ON RECORD) HAS TAKEN A DIFFERENT VIEW, STATING THAT THE PROVISION SHALL APPLY ONLY TO AN AMOUNT PA YABLE AS AT THE YEAR-END. HOWEVER, AS SHALL BE APPARENT FROM A READING OF THE SAID DECISI ON, THE HONBLE COURT DOES NOT STATE THE REASON/S THAT INFORM ITS DECISION. THERE IS, IN FA CT, NO DISCUSSION OF THE PROVISION, OR OF ITS INTERPRETATION, BY IT IN THE SAID DECISION, WHICH, THEREFORE, HAS TO BE READ AS RENDERED IN THE FACTS OF THE CASE; THE HONBLE COURT ALLUDING T O VARIOUS OTHER REASONS THAT PREVAILED 10 ITA NO.6449/MUM/2011 & CO NO.157/MUM/2012 RAVIRAJ RELEMPADDU (A.Y. 2008-09) WITH THE LOWER AUTHORITIES IN ACCEPTING THE ASSESSE ES CONTENTION/S. FURTHER, THE SECTION HAS TO BE READ IN HARMONY AND CONJUNCTION WITH OTHE R PROVISIONS, EVEN AS WAS SOUGHT TO BE EMPHASIZED IN CRESCENT EXPORT SYNDICATE (SUPRA) (PG. 272) WITH REFERENCE TO THE DECISION IN THE CASE OF A. S. KRISHNA VS. STATE OF MADRAS AIR 1957 SC 295. 4.3 IN VIEW OF THE FOREGOING, WE FIND NO MERIT IN T HE ASSESSEES CLAIM/S PER ITS C.O. 5. IN THE RESULT, THE BOTH THE REVENUES APPEAL AND THE ASSESSEES C.O. ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 03, 2 014 SD/- SD/- (B. R. MITTAL) (SANJAY AROR A) / JUDICIAL MEMBER / ACCOUNTANT MEMBER , - MUMBAI; 3( DATED : 03.01.2014 %.(../ ROSHANI , SR. PS !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $!# / THE RESPONDENT 3. , 4 ( ) / THE CIT(A) 4. , 4 / CIT - CONCERNED 5. 7%89 $ (:) , . :)1 , , - / DR, ITAT, MUMBAI 6. 9;* <- / GUARD FILE !' ) / BY ORDER, */)+ , (DY./ASSTT. REGISTRAR) , , - / ITAT, MUMBAI