M/s. Mahavir Cotton Traders, V. Income tax Officer, Bathinda

CO 19/ASR/2010

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8441 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-05-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-05-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 06-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: J K GUPTA
• Keywords: Onus to prove
• Section: 143(3); 194C; 263; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.326(ASR)/2010 ASSESSMENT YEAR:2005-06 PAN :AAFM8985C INCOME TAX OFFICER, VS. M/S. MAHABIR COTTON TRADE RS, WARD-2(1), BATHINDA. BHUCHO MANDI. (APPELLANT) (RESPONDENT) C.O. NO.19(ASR)/2010 (ARISING OUT OF I.T.A. NO.326(ASR)/2010) ASSESSMENT YEAR:2005-06 PAN :AAFM8985C M/S. MAHABIR COTTON TRADERS VS. INCOME TAX OFFICER, BHUCHO MANDI. WARD-2(1), BATHINDA. (APPELLANT) (RESPONDENT) DEPARTMENT BY :SH.TARSEM LAL, DR ASSESSEE BY:SH. J.K.GUPTA, ADVOCATE DATE OF HEARING: 23/05/2013 DATE OF PRONOUNCEMENT:30/05/2013 ORDER PER BENCH ; THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE CIT(A), BATHINDA DATED 06.05.2010 FOR THE ASSESSMENT YEAR 2 005-06. THE ASSESSEE HAS ALSO FILED A CROSS OBJECTION. 2 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1 4,35,040/- MADE BY THE A.O. ON ACCOUNT OF VIOLATION OF PROV ISIONS OF SECTION 40(A)(IA) OF THE I.T. ACT, 1961. 2. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SE T ASIDE AND THAT OF THE A.O. BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROU NDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 3. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN ITS CROSS OBJECTION: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT BATHINDA ERRED IN GIVING SANCTIO N FOR FILING SECOND APPEAL AS HE HIMSELF HAS DECIDED THE APPEA L IN FAVOUR OF THE RESPONDENT ASSESSEE AS CIT(A) BATHI NDA. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE APPEAL OF THE REVENUE IS NOT MAINTAINABLE AS THE SAME WAS DECIDED BY THE LD. CIT(A) ON THE ADMISSION OF T HE AO IN HIS REMAND REPORT THAT CRUSHING CHARGES OF BINOLA A RE THE PART OF THE TRADING/MANUFACTURING ACCOUNT AND THE CIT(A) HA S GIVEN A CLEAR FINDING THAT IT WOULD FALL U/S 28 WHICH SECTI ON IS NOT THERE IN SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961. T HIS FINDING OF THE CIT(A) HAS NOT BEEN CHALLENGED/DISPUTED BY T HE REVENUE. 3. THAT THE PAYMENT MADE BY THE RESPONDENT ASSESSEE FO R CRUSHING CHARGES OF BENOLA TO SHRI BALAJI OIL MILLS, BHUCHO FALL U/S 194I NOT U/S 194C AS THE RESPONDENT ASSESSEE HAS TAKEN THE WHOLE FACTORY ON RENT AND DURING THE RELEVANT ASSESSMENT YEAR SECTION 194I (RENT) WAS NOT THE PART OF SECTION 40(A)(IA) O F THE ACT. 4. THAT THE DEPARTMENT HAS NOT PROVED WITH COGENT EVID ENCE THAT M/S. SHRI BALAJI OIL MILLS, BHUCHO IS A CONTRACTOR IN RELATION TO THE RESPONDENT ASSESSEE, SO WE ARE NOT LIABLE TO DE DUCT TDS U/S 194C FOR MAKING PAYMENT OF CRUSHING CHARGES OF BINO LA TO THAT 3 FIRM. ACCORDINGLY, THE FINDING OF THE CIT(A) IS WRO NG THAT THE PROVISIONS OF SECTION 194C ARE APPLICABLE. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) SHOULD HAVE DELETED THE BALANCE ADDITION OF RS.26244. 4. THE BRIEF FACTS IN REVENUES APPEAL AND C.O. OF THE ASSESSEE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND DOING THE BU SINESS OF COTTON SEED GINNING AND HAVING TAKEN ON RENT THE FACTORY OF M/S . SHRI BALAJI OIL MILLS, BHUCHO IN ACCORDANCE WITH THE COMPOSITE AGREEMENT D ATED 01.09.2004 CONTAINING THEREIN FIXED RENT @ RS.45/- PER QTL. OF THE COTTON SEED TO BE CRUSHED WHEREBY M/S. SHRI BALAJI OIL MILLS CANNOT W ORK FOR ANY OTHER FIRM EXCEPT THAT OF THE ASSESSEE. THUS, COMPLETE POSSESS ION AND ENJOYMENT OF THE FACTORY WAS AT THE DISPOSAL OF THE ASSESSEE. 5. THE RETURN OF INCOME WAS FILED ON 26.09.2005 AT AN INCOME OF RS.47,770/- WHEREIN THE CLAIM OF EXPENSES OF RS.14, 61,285/- WAS MADE HAVING BEEN PAID TO M/S. SHRI BALAJI OIL MILLS, BHU CHO TOWARDS CRUSHING OF BINOLA AFTER HAVING CHARGED THE SAME AGAINST THE I NCOME WHEREUPON TAX WAS NOT DEDUCTED ON THE SAID PAYMENTS. 6. THE RETURNED INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 22.05.2006 WHICH WAS SUBSEQUENTLY TAKEN UP FOR S CRUTINY THROUGH ISSUANCE AND SERVICE OF NOTICE U/S 143(2) OF THE AC T, DATED 25.07.2006 AND CONSEQUENTLY SCRUTINY ASSESSMENT WAS COMPLETED ON THE ADDITION OF 4 RS.50,200/-, THUS DETERMINING THE TOTAL INCOME OF T HE ASSESSEE AT RS.97,980/- THROUGH ORDER OF THE A.O. DATED 28.02.2005. SINCE T HE PROCEEDINGS WERE INITIATED THROUGH ISSUANCE OF NOTICE UNDER SECTION 263(1) OF THE I.T.ACT, 1961, DATED 12.03.2009 & 19.03.2009 AND IN RESPONSE TO WHICH THE SUBMISSIONS WERE ADVANCED ON 30.03.2009 WHEREBY T HE COMMENTS OF THE AO TOO WERE CALLED FOR ON 30.03.2009 THROUGH LETTER NO. 200 NOT BEING CONVINCED, THE ASSESSMENT ORDER WAS HELD TO BE ERRO NEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR WHICH THE FINDINGS ARE EXTRACTED BELOW: IN VIEW OF THE ABOVE MENTIONED AND LEGAL POSITION, IT IS HELD THAT IT IS A FIT CASE FOR INVOKING THE PROVISIONS OF SECTION 263 OF THE I.T. ACT, 1961, AS THE ASSESSMENT FRAMED BY THE A.O. ON 28.0 2.2007 U/S 143(3) IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDINGLY, THE ASSESSMENT FRAMED BY THE I.T.O., WARD-II(1), BATHINDA ON 28.02.2007 U/S 143(3) OF THE I.T. ACT , 1961 IS CANCELLED U/S 263 OF THE ACT AND THE A.O. IS DIRECTED TO FRA ME FRESH ASSESSMENT, IN THE LIGHT OF THE OBSERVATIONS MADE BY THE UNDER SIGNED IN THE FOREGOING PARAGRAPH 7. THE REVISION ORDER DATED 31.03.2009 HAS ATTAINED FINALITY UNDISPUTEDLY ON LEGALITY WHEREAS CONSEQUENTIAL THE FRESH NOTICE UNDER SECTION 143(2) DATED 22.05.2009 WAS ISSUED AND SERVED WHEREBY THE PROCEEDINGS WERE CONTINUED AND CONCLUDED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 02.10.2009 AT AN ASSESSED INCOME OF RS.15,59,270/- WITH THE UNDER-STATED FINDINGS: 5 AS STATED EARLIER IN THE FOREGOING PARAGRAPHS, TH E ASSESSEE FAILED TO DEDUCT TDS OUT OF THE CRUSHING CHARGES PAID TO M/S SHREE BALAJI OIL MILLS, BHUCHOO AS PER PROVISIONS OF SECTION 194C, THE TOTAL PAYMENTS FOR WHICH WERE DEBITED TO ASSESSEES PROFIT & LOSS ACCOUNT AT RS. 14,61,285/-. AS SUCH THE EXPENSES DEBITED TO PROFI T & LOSS ACCOUNT AT RS. 14,61,285/- ON ACCOUNT OF CRUSHING CHARGED PAI D TO THE SAID CONCERN ARE NOT ALLOWABLE AS PER PROVISIONS OF SEC TION 40A(IA) OF THE INCOME TAX ACT. ACCORDINGLY, THESE EXPENSES ARE DI SALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE ALREADY A SSESSED AS PER ORIGINAL ASSESSMENT. TOTAL INCOME OF THE ASSESSEE IS RE-COMPUTED AS UNDE R:- INCOME AS PER ASSESSMENT ORDER U/S 143(3) DATED 28.02.2007 RS. 97,980/- ADD: DISALLOWANCE OF CRUSHING CHARGES AS DISCUSSED ABOVE RS. 14,61,285/- TOTAL INCOME ASSESSED RS. 15,59,265/- OR SAY RS. 15,59,270/- 8. HOWEVER, THE GRIEVANCE OF THE ASSESSEE CONTINUED , HENCE ORDER DATED 02.10.2009 PASSED BY THE A.O. WAS CHALLENGED IN AP PEAL BEFORE THE LD. CIT(A) THROUGH VARIOUS GROUNDS OF APPEAL DATED 09.1 1.2009 REPRODUCED HEREIN BELOW PRIMARILY CONFINING TO THE ARGUMENTS T O THE EXTENT ALLOWANCE IS CORRECTLY CLAIMED ACCORDING TO THE PROVISIONS OF SE CTION 28 OF THE ACT AND WHICH PROVISIONS ONLY ARE APPLICABLE TO THE FACTS A ND CIRCUMSTANCES AND NATURE OF THE CASE. 6 3. THAT THE LEARNED A.O. ERRED IN MAKING AN ADDITI ON OF RS. 1461285/- KEEPING IN VIEW THE FACTS AND CIRCUMSTA NCES OF THE CASE. 4. THAT RS. 1461285/- WAS PAID FOR OUT SOURCING JOB WORK OF CRUSHING OF BINOLA SO IT IS AN ITEM FALLING UNDER MANUFACTURING/TRADING ACCOUNT. ACCORDING, THE SAME CAN NOT FALL UNDER ANY SECTIONS IN 30 TO 38. ACCORDINGLY, THE ADDITION OF RS. 1461285/- IS LIABLE TO BE DELETED. 5. THAT ITEMS OF EXPENDITURE WHICH DO NOT FALL UNDE R SECTIONS 30 TO 38, CANNOT FALL WITH THE PURVIEW OF SECTIONS 40(A) (IA) OF THE ACT. ACCORDINGLY, THE ADDITION IS LIABLE TO DELETED. 6. THAT THE OMISSION OF NON DEDUCTION OF TDS IS MAD E GOOD BY M/S SHREE BALAJI OIL MILLS, BHUCHO MANDI, AS THAT ASSESSEE HAS SHOWN THE CRUSHING CHARGES IN THEIR RETURN OF INCO ME, SO IN VIEW OF EXPLANATION TO S-191 OF THE ACT, THE ADDIT ION OF RS. 1461285/- IS LIABLE TO BE DELETED. 7. THAT THE ASSESSEE HAD NOT DEDUCTED TDS ON THIS O UT SOURCING JOB WORK OF CRUSHING OF BINOLA ON THE ADVICE OF IT S STATUTORY AUDITOR SO THIS ADDITION IS LIABLE TO BE DELETED. 9. BEFORE THE LD. CIT(A), THE CONTENTIONS WERE RAI SED RELYING UPON THE DICTIONARY MEANING TO THE WORD CONTRACTOR, THE DECISION OF JAIPUR VIDYUT VITRAN NIGAM VS. DCIT, J.C. BANSAL, CHIEF ENGINEERS VS. TRO-2 UJJAIN. SECTION 194C, SECTION 40A(IA) AND THE WORDS UTILIZE D IN THE FINANCE BILL 2004 CERTAIN OPINION OF THE AUTHORS AND IN CONSEQUENCE T HERETO THE REMAND REPORT OF THE A.O. VIDE LETTER NO.2677 DATED 31.03.2010 WA S CALLED FOR, FOR WHICH WAS PRAYED FOR UPHOLDING AOS ORDER DATED 02.10.200 9. HAVING NOTICED THE AFORESAID POINTS RAISED BY THE ASSESSEE AND IN THE REMAND REPORT, THE LD. 7 CIT(A) ALLOWED THE GROUNDS TREATING THE APPEAL PART LY ALLOWED THROUGH ORDER DATED 06.05.2010 AT PAGES 10 & 11 OF HIS ORDER BY G IVING THE FOLLOWING FINDINGS: I HAVE CONSIDERED THE ARGUMENTS OF LEARNED COUNSE L FOR THE APPELLANT AND THE REMAND REPORT OF THE A.O. ON THIS ISSUE AS WELL AS THE AFORESAID JUDGMENT OF THE HON'BLE SUPREME COURT AND HOLD THA T THE A.O. SHOULD HAVE SEEN THE TRUE NATURE AND QUALITY OF THE RECEI PT AND NOT THE HEAD UNDER WHICH IT IS ENTERED IN THE ACCOUNTS BOOKS OF THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND SHOULD HA VE RECASTED THE PROFIT AND LOSS ACCOUNT AND TRADING ACCOUNT, IN VI EW OF HIS OWN ADMISSION THAT THE CRUSHING CHARGES ARE THE PART O F TRADING/MANUFACTURING ACCOUNT. ACCORDINGLY, THESE CRUSHING CHARGES WOULD FALL UNDER THE PROVISIONS OF SECTION 28 WHIC H DO NOT FIND PLACE IN THE PROVISIONS OF SECTION 40(A)(IA). ACCORDINGL Y, THERE APPEARS TO BE MERIT IN THE ARGUMENTS OF THE APPELLANT THAT THIS AMOUNT OF CRUSHING CHARGES CANNOT BE DISALLOWED ON THE BASIS OF PROVI SIONS OF SECTION 40(A)(IA). THE NEXT GROUND OF APPEAL IS REGARDING THE WORD PA YABLE WHICH IS USED BEFORE THE RESIDENT CONTRACTOR OR SUB -CONTRACTOR. THE LEARNED COUNSEL POINTED OUT THAT THE WORDS USED WER E CREDITED OR PAID IN CLAUSE 11 OF FINANCE BILL, 2004 AT THE TIME OF I TS INTRODUCING IN THE LOK SABHA, BUT WERE SUBSTITUTED BY THE WORD PAYABLE WHILE PASSING THE FINANCE BILL IN TO ACT. HE RELIED UPON THE MEAN ING OF WORD PAYABLE FROM THE BLACKS LAW DICTIONARY (5 TH EDITION) AS WELL AS THE OPINION OF THE LEARNED AUTHORS GIVEN AT PAGE 386/87 OF TAXMANS DIRECT TAX LAW AND PRACTICE (AUG, 2009 EDITION). HE ALSO RELIED UPON THE PARA 9.12 OF THE CASE DECIDED BY JAIPUR BENCH O F I.T.A.T. IN THE CASE OF JAIPUR VIDYUT VITRAN NIGAM LIMITED VS. DCIT (2009) 26 DTR TRIBUNAL ORDERS AND FILED ITS PHOTOCOPY AS WELL AS UPON MY DECISION IN THE CASE OF M/S KISHAN MAL OIL COTTON & GINNING FACTORY, RAMPURAPHUL (APPEAL NO. 187-IT-CIT(A)/BTI/09-10 DAT ED 15.04.2010) DECIDED ON THE BASIS OF TEJA CONSTRUCTI ONS VS. ACIT, HYDERABADN A BENCH (I.T.A. NO. 308/HYD/2009 DATED 23.10.2009 FOR THE ASSTT. YEAR 2005-06) REPORTED AT 36 DTR(HYD ) (TRIBUNAL) 220 8 AND RELIED UPON THE FOLLOWING FINDING GIVEN BY ME I N THAT CASE WHICH ARE BEING REPRODUCED BELOW:- I HAVE GIVEN DUE CONSIDERATION TO THE FACTS OF THE CASE AND THE PROVISIONS OF LAW IN THIS RESPECT. IT IS IMPORTANT TO NOTE THAT FROM THE WORDING OF S. 40(A)(IA), IT IS VERY CLEAR THAT THE SECTION IS APPLICATION ON EXPE NDITURE PAYABLE. IT IS NOT APPLICABLE TO THE EXPENDITURE P AID. THE WORD PAID HAS BEEN DEFINED IN SECTION 43(2) OF THE IN COME-TAX ACT, 1961 WHICH MEANS PAID OR PAYABLE ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY FOLLOWED OR EMPLOYED BY THE A SSESSEE. HOWEVER, THE WORD PAYABLE HAS NO WHERE BEEN DEFI NED IN THE I.T. ACT, 1961. THUS, BY IMPLICATION, THE WORD PA YABLE DOES NOT INCLUDE PAID SIMPLY BECAUSE THERE IS NO SUCH DEFINITION OR DEEMING PROVISION FOR THE WORD PAYABLE. THEREFOR E, IN MY VIEW, THE DISALLOWANCE UNDER SECTION 40(A)(IA) CAN ONLY BE MADE IN RESPECT OF EXPENDITURE WHICH IS PAYABLE AN D IF THE EXPENDITURE HAS ALREADY BEEN PAID, NO SUCH DISALLO WANCE CAN BE MADE. THUS, SECTION 40(A)(IA) IS NOT APPLICABLE WH ERE THE EXPENDITURE IS PAID. IT IS APPLICABLE ONLY IN A CA SES WHERE THE PAYMENTS ARE DUE AND OUTSTANDING. THEREFORE, AFTER GOING THROUGH THE FACTS AND PROVIS IONS OF LAW AND RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON 'BLE BENCH (DISCUSSED (SUPRA)), I AGREE WITH THE APPELLANT AN D THEREFORE, HOLD THAT PROVISIONS ARE APPLICABLE ONLY IN RESPEC T OF THE EXPENDITURE WHICH REMAINED PAYABLE AT THE END OF T HE YEAR. AFTER PERUSING THE RECORDS, I FIND THAT AS PER THE BALANCE SHEET AT THE END OF THE YEAR, ONLY A SUM OF RS. 1649262/ - REMAINED PAYABLE OUT OF RS. 86238103/-. THEREFORE, THE MAXI MUM DISALLOWANCE WHICH COULD BE MADE U/S 40(A)(IA) SHO ULD BE RS. 1649262/-. THE APPELLANT HAS CLAIMED THAT OUT OF T HIS MOST OF THE AMOUNTS PAYABLES ARE ON ACCOUNT OF GOODS SUPPL IED BY THE PAYEE, AMOUNTING TO RS. 1631597/-, BUT THE APPELLA NT HAS FAILED TO ESTABLISH THAT THIS PAYABLE AMOUNT IS AGAINST T HE PURCHASE OF GOODS. HENCE, THIS PLEA OF THE APPELLANT IS NOT AC CEPTED. ON THESE FACTS AND IN VIEW OF THE LEGAL POSITION, I S USTAIN THE DISALLOWANCE OF RS. 1649262/- AS AN EXPENDITURE DI SALLOWANCE U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961. THE APP ELLANT GETS A RELIEF OF RS. 6974551/-. 9 ON THE OTHER HAND THE A.O. CONTENDED THAT THE WORD PAYABLE INCLUDES THE WORD PAID ALSO AND THAT IT DOES NOT MAKE ANY DIFFERENCE WHETHER THE PAYMENT IS MADE DURING THE PARTICULAR YEAR OR IN THE SUBSEQUENT YEAR. I HAVE CONSIDERED THE ARGUMENTS OF THE LEARNED COU NSEL OF THE APPELLANT AND THE FACTS OF THE CASE AND PROVISIONS OF LAW AND THE REMAND REPORT OF THE A.O ON THIS ISSUE AS WELL AS THE AFORESAID JUDGMENT OF THE JAIPUR BENCH OF I.T.A.T. IN THE CA SE OF M/S JAIPUR VIDYUT VITRAN NIGAM LIMITED VS. DICT AND MY OWN DE CISION IN THE CASE OF M/S KISHAN MAL OIL COTTON & GINNING FACTOR Y, RAMPURAPHUL (APPEAL NO. 187-IT-CIT(A)/BTI/09-10 DATED 15.04.20 10). I AGREE WITH THE APPELLANT THAT THEREFORE, HOLD THAT PROVI SIONS ARE APPLICABLE ONLY IN RESPECT OF THE EXPENDITURE I.E. CRUSHING C HARGES WHICH REMAINED PAYABLE AT THE END OF THE YEAR. AFTER PER USING RECORDS, I FIND THAT AS PER THE BALANCE-SHEET OF THE APPELLANT AT THE END OF THE YEAR, ONLY A SOME OF RS. 26245/- REMAINED PAYABLE OUT OF RS. 1461285/-. THEREFORE, THE MAXIMUM DISALLOWANCE WHICH COULD BE MADE U/S 40(A)(IA) SHOULD BE RS. 16245/-. ON THESE FACTS AN D LEGAL POSITION I SUSTAIN THE DISALLOWANCE OF RS. 26245/- AS AN EXPE NDITURE DISALLOWABLE U/S 40(A)(IA) OF THE I.T. ACT, 1961. THE APPELLAN T GETS A RELIEF OF RS. 1435040/-. 10. THE REVENUE BEING AGGRIEVED WITH THE FINDINGS O F THE LD. CIT(A), CHALLENGED THE SAME THROUGH THE STATEMENT OF FACTS AND GROUNDS OF APPEAL DATED 14.07.2010 WHICH IS REPRODUCED FOR THE SAKE O F CLARITY AS UNDER: THE WORD PAYABLE INCLUDES THE WORD PAID ALSO. WHEN THE CRUSHING WORK OF THE ASSESSEES BINOLA WAS UNDERTA KEN, THE PAYMENT OF CERTAIN MONEY BECAME PAYABLE WHICH WAS SUBSEQUE NTLY PAID BY THE ASSESSEE LEAVING A PETTY BALANCE PAYABLE AS ON THE LAST DAY OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UND ER REPORT. THE LEGISLATURE HAS USED THE WORD PAYABLE IN THE SEN SE THAT WHENEVER A PAYMENT BECOMES DUE TO THE PERSON WHO RENDERS THE SERVICE/WORK A CERTAIN AMOUNT OF PAYMENT BECOMES PAYABLE TO THAT PERSON AND IT DOES NOT MAKE ANY DIFFERENCE WHETHER THAT PAYMENT IS PA ID DURING A PARTICULAR YEAR OR IN THE SUBSEQUENT YEAR. THE LEA RNED CIT(A) HAS NOT 10 INTERPRETED THE PROVISIONS OF SECTION 40(A)(IA) IN BROAD SENSE, AS THE INTENTION OF LEGISLATURE IN ENACTING THESE PROVISI ONS WAS TO LEVY TAX ON THE AMOUNTS COMING DUE FROM ANY SERVICE RENDERED O N WHICH TDS WAS NOT DEDUCTED. KEEPING IN VIEW ABOVE FACTS LEARNED CIT(A) HAS ERRE D IN DELETING THE ADDITION OF RS. 14,35,040/- MADE BY TH E A.O. WITHOUT CONSIDERING THE FACTS DISCUSSED IN THE ASSESSMENT O RDER AS WELL AS REMAND REPORT DATED 26.04.2010 SUBMITTED BEFORE HIM . 11. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED ON RECORD PAPER BOOK CONTAINING 20 PAGES DATED 23.05.2013 FOR SUBSTANTIA TING THE CONTENTIONS PRIMARILY DEVOTED TO THE GROUNDS OF CROSS OBJECTION S DATED 01.08.2010 ADDRESSING TO THE GRANTING OF ALLOWANCE AND UPHOLD ING THE FINDINGS OF THE LD. CIT(A) AND ADDITIONALLY A VALIANT ATTEMPT MADE TO BUTTRESS THE ARGUMENTS BY RELYING UPON THE DECISION OF COORDINATE BENCH IN T HE CASE OF TEJA CONSTRUCTIONS VS. ACIT (2010) 36 DTR 220 (HYD. TRIB ) AND N. RAMACHANDRA REDDY, ITA NO.1372 OF 2007 COORDINATE B ENCH ORDER DATED 6 TH MARCH, 2009 NOTICED IN PARAGRAPH 13 OF TEJA CONSTR UCTIONS CASE WHEREBY NO FACET OF CONTROVERSY OF THE ASSESSEE HAS BEEN RA ISED TAKING THROUGH VARIOUS DOCUMENTS AND MATERIAL FACTS SHIFTING THE BURDEN OF PROOF IS ON THE REVENUE QUA NON BRINGING OF EVIDENCE ON RECORD THAT SHRI BALAJI OIL MILLS IS A CONTRACTOR IN RELATION TO RESPONDENT-ASSESSEE, HE NCE NONE LIABILITY FOR DEDUCTION UNDER SECTION 194C OF THE ACT. 11 12. PERTINENT TO REFER THAT LABYRINTH SUBMISSIONS HAVING BEEN MADE CONTENDING THEREIN THAT ALLOWANCE IS TO BE GRANTED ACCORDING TO THE SOLITARY PROVISION OF SECTION 28 WHILE READING THE SAME AS STAND ALONE OF SECTION DE-HORSE OTHER PROVISIONS OF THE ACT AND THUS PRAYI NG FOR ALLOWING THE CROSS OBJECTION AND DISMISSING THE APPEAL OF THE REVENUE. 13. IN CONTRADICTION TO THE SUBMISSIONS RAISED BY T HE LD. COUNSEL FOR THE ASSESSEE (SUPRA), THE LD. DR MR. TARSEM LAL RAISED POINT-WISE REBUTTAL ON VARIOUS FACTS OF THE CONTROVERSY WHICH CHRONOLOGICA LLY RUN AS NAMELY THE CONSTITUTIONAL VALIDITY OF SECTION 40(A)(IA) UPHELD WHILE PAYMENTS MADE WITHOUT DEDUCTING TAX AT SOURCE IN THE DECISION IN W.T. 186 OF 2008 IN DEYS MEDICAL (U.P.) PVT. LTD. VS. UNION OF INDIA AND OTH ERS (2009) 316 ITR 445 (ALL) DATED 15.02.2008 , TUBE INVESTMENTS OF INDIA LTD. AND ANOTHER VS. ACIT IN CWP NO.33766 OF 2007 AND OTHERS REPORTED IN (2010) 325 ITR 610 ( MADRAS) DATED 29,09,2009, CIT-IV VS. SIKANDA R KHAN N. TUNVAR DATED 02.05.2013 IN TAX APPEAL NO.905 OF 2012 , CIT VS. (GUJ) , CIT VS. MERILYN SHIPPING & TRANSPORTS ( ITA NO.477/VIZ/2008 DATED 29 TH MARCH, 2012 (SB) AND AGAINST THE SPECIAL BENCH DECISION OF THE TRIBU NAL FINALLY THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE IN ITA NO. 20 OF 2013 GA 190 OF 2013 WHIC H NOTICES THE DECISION OF DEYS MEDICAL (U.P.) PVT. LTD. (SUPRA). 12 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IT IS PERTINENT TO MENTION THAT THE ASSESSEE HAS FA ILED TO ADDRESS ANY REBUTTAL OF WHATSOEVER KIND TO THE JUDGMENTS OF HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF DEYS MEDICAL (U.P.) PVT. LTD. , HONBL E MADRAS HIGH COURT IN THE CASE OF TUBE INVESTMENTS OF INDIA LTD. AND AN OTHER VS. ACIT (SUPRA), HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT-IV V S. SIKANDARKHAN N. TUNVAR (SUPRA) AND HONBLE CALCUTTA HIGH COURT IN T HE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (SUPRA), WHICH ARE THE DE CISIONS ON THE IMPUGNED ISSUES AS RAISED. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF SPECIAL BENCH IN THE CASE OF CIT VS. MERILYN SHIPPI NG & TRANSPORTS (SUPRA) ONLY IN THIS REGARD BUT HAS NOT REBUTTED THE SAID D ECISIONS OF THE HONBLE HIGH COURTS MENTIONED HEREINABOVE. 15. SECONDLY, REGARDING RELIANCE PLACED ON THE DEC ISION OF COORDINATE BENCH OF HYDERABAD IN THE CASE OF TEJA CONSTRUCTION S VS. ACIT (SUPRA), WE ARE OF THE VIEW THAT THE ARGUMENTS HAVE NOT BEEN CO NCLUDED TO THE LOGICAL END WHILE THE SAID ORDER WITH GREATEST RESPECT OF THE ITAT IS DATED 23.10.2009 BEFORE THE CONSTITUTIONAL VIRUS WERE UN DER CHALLENGE AS REVEALED THROUGH THE JUDGMENTS BEING BY THE HONBLE HIGH COU RT OF ALLAHABAD IN THE CASE OF DEYS MEDICAL (U.P.) P LTD. (SUPRA) WHICH IS DATED 15.02.2008 AND JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE O F TUBE INVESTMENTS OF 13 INDIA VS. ACIT (SUPRA) WHICH IS DATED 29.09.2009 AN D DECISION OF ITAT, SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRA NSPORTS DATED 29.03.2012 WHEREBY AT THE TIME OF CASE DISPOSAL BEF ORE US, WE HAVE THE BENEFIT OF ADDITIONAL JUDGMENT OF HONBLE GUJRAT HI GH COURT IN THE CASE OF CIT-IV VS. SIKANDARKHAN N TUNVAR AND HONBLE CALCUT TA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (SUPRA). THUS, WE ARE BOUND TO FOLLOW THE LAW PREVALENT AT THE RELEVANT DATE AND T IME. EVEN OTHERWISE, CONTROVERSY RAISED STANDS ANSWERED AGAINST THE ASSE SSEE AND THEREFORE THE DEPARTMENTAL APPEAL IS ALLOWED TO THAT EXTENT WHER EBY THE SAID ASPECT OF THE FINDINGS BY THE HONBLE HIGH COURT OF CALCUTTA IN T HE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE ARE REPRODUCED HEREIN BE LOW WHICH ARE PERTINENT FINDING OF THE HONBLE HIGH COURT IN THE PRESENT CA SE.: IN THE BACKDROP OF THESE SUBMISSIONS, HONBLE MAD RAS HIGH COURT UPHELD THE CONSTITUTIONAL VALIDITY OF THE PROVISIO NS OF SECTION 40(A)(IA) AND MADE VARIOUS OBSERVATIONS:- (I) HONBLE MADRAS HIGH COURT, INTER ALIA, NOTED THE OB SERVATIONS OF HONBLE SUPREME COURT IN THE CASE OF A.S.KRISHNA V. STATE OF MADRAS AIR 1957 SC 297 WHICH ARE AS UNDER:- IT WOULD BE QUITE AN ERRONEOUS APPROACH TO THE QUE STION TO VIEW SUCH A STATUTE NOT AS AN ORGANIC WHOLE, BUT AS A MERE COLLECTION OF SECTIONS THEN DISINTEGRATE IT INTO PA RTS, EXAMINE UNDER WHAT HEADS OF LEGISLATION THOSE PARTS WOULD S EVERALLY FALL, AND BY THAT PROCESS DETERMINE WHAT PORTIONS THEREOF ARE INTER VIRES AND WHAT ARE NOT. THUS, SECTION 40(A)(IA) COU LD NOT BE 14 VIEWED INDEPENDENTLY AND HAD TO BE CONSIDERED ALONG WITH OTHER PROVISIONS. (II) THE PROVISIONS OF SECTION 40(A)(IA) WERE COMPARED W ITH THE PROVISIONS OF SECTION 201 OF THE INCOME TAX ACT AND , IT WAS, INTER ALIA, OBSERVED THAT AS FAR AS SECTION 201 IS CONCERNED THAT WOULD RELATE TO THE AMOUNT OF TAX THAT COULD BE DED UCTED BY WAY OF TDS. HOWEVER, AS FAR AS SECTION 40(A)(IA) IS CONCERNED, WHICH WOULD RESULT IN THE DISALLOWANCE OF WHOLE OF THE EXPENDITURE AND THEREBY THE ENTIRE SUM EXPENDED WOU LD ATTRACT THE LEVY OF TAX AT A PRESCRIBED RATE WITH ALL OTHER CONDITIONS SUCH AS SURCHARGE, ETC. THUS, HONBLE MADRAS HIGH COURT HAS ALSO HELD IN PA RA 61 OF ITS JUDGMENT THAT WHOLE OF THE EXPENDITURE CLAIMED WITHOUT MAKING TDS IS TO BE DISALLOWED AND NOT ONLY PART OF THE EXPENDITURE. (III) (III) THE FINANCE BILL NO.2 OF 2004 STATES THAT THE INSER TION OF CLAUSE (IA) IN CLAUSE (A) TO SECTION 40 OF THE ACT WAS WIT H A VIEW TO AUGMENT COMPLIANCE OF TDS PROVISIONS. (IV) WHEN THE PROVISIONS AND PROCEDURES RELATING TO TDS ARE SCRUPULOUSLY APPLIED, FIRST AND FOREMOST IT ENSURES THE IDENTIFICATION OF THE PAYEES AND THEREBY NETWORK OF ASSESSEES GETS CONFIRMED. WHEN ONCE SUCH IDENTITY OF ASSESSEE S, WHO ARE IN RECEIPT OF THE INCOME CAN BE ASCERTAINED, IT WIL L ENABLE TAX COLLECTION MACHINERY TO BRING WITHIN ITS FOLD ALL S UCH PERSONS WHO ARE LIABLE TO COME WITHIN THE NETWORK OF TAXPAY ERS. THUS, IF IT IS HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE IN RESPECT OF THOSE PAYMENTS WHICH HAVE BEEN PAID WITHOUT MAKING TDS AND AT THE END OF THE YEAR NO AM OUNT IS OUTSTANDING THEN THE VERY OBJECT OF IDENTIFICATION OF PAYEES WILL GET FRUSTRATED. (V) THE LEGISLATIVE INTENT OF THE INTRODUCTION OF SECTI ON 40(A)(IA) IS IN THE LARGER PERSPECTIVE OF AUGMENTING THE VERY TD S PROVISIONS THEMSELVES. IT IS NOT MERELY RELATED TO THE COLLECTION OF TDS ONLY. (VI) THE INTENTION OF THE LEGISLATURE IS NOT TO TAX THE PAYER FOR ITS FAILURE TO DEDUCT THE TAX AT SOURCE. THE OBJECT OF INTRODUCTION OF SECTION 40(A)(I) AS WELL AS SECTION 40(A)(IA) IS TO ENSURE THAT ONE OF THE MODES OF RECOVERY AS PROVIDED IN CHAPTER XVI I-B IS 15 SCRUPULOUSLY IMPLEMENTED WITHOUT ANY DEFAULT, IN OR DER TO AUGMENT THE SAID MODE OF RECOVERY. HONBLE MADRAS HIGH COURT, INTER ALIA, OBSERVED AT PARA 69 OF ITS JUDGMENT AS UNDER:- WITH THE PROVISO TO SECTION 40(A)(IA) THE DEDUCTIO N IN THE SUBSEQUENT YEAR BY RECTIFYING THE DEFAULT COMMITTE D IN THE MATTER OF TDS IN THE PREVIOUS YEAR, A DEFAULTING A SSESSEE CANNOT BE HEARD TO SAY THAT IRRESPECTIVE OF THE DELIBERAT E DEFAULT COMMITTED BY IT IN IMPLEMENTING THE PROVISION RELA TING TO TDS, IT SHOULD BE HELD THAT A HIGHER TAX LIABILITY IS M ULCTED ON IT. HONBLE MADRAS HIGH COURT, INTER ALIA, OBSERVED IN PARA 83 OF ITS JUDGMENT AS UNDER:- AFTER ALL THE PROVISO HAS BEEN INSERTED IN ORDER T O ENSURE THAT EVEN A DEFAULTER IS NOT PUT TO SERIOUS PREJUDICE, IN AS MUCH AS, BY OPERATION OF THE SUBSTANTIVE PROVISION, THE EXP ENDITURE WHICH IS OTHERWISE ALLOWABLE AS A DEDUCTION IS DEN IED ON THE GROUND THAT THE OBLIGATION OF TDS PROVISIONS IS VI OLATED. THE LAW MAKES WHILE IMPOSING SUCH A STRINGENT RESTRICT ION WANTED TO SIMULTANEOUSLY PROVIDE SCOPE FOR THE DEFAULTER TO GAIN THE DEDUCTION BY COMPLYING WITH THE TDS PROVISION AT A LATER PINT OF TIME. THUS, IMPLIEDLY HONBLE MADRAS HIGH COURT, HAS, INTER ALIA, HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) WILL BE APPLICABLE WITH RESPECT TO ENTIRE EXPENDITURE. IT IS TRUE THA T SPECIFIC ISSUE REGARDING PAID, CREDITED AND PAYABLE HAS NOT BEEN CONSIDERED BUT FROM THE JUDGMENT IT IS EVIDENT THA T IF ASSESSEES CONTENTION IS ACCEPTED THEN THE VERY OBJECT OF INC ORPORATION OF SECTION 40(A)(IA) WOULD BE FRUSTRATED. 21. IN VIEW OF ABOVE DISCUSSION, WE ANSWER THE QUESTION AS UNDER:- THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961, ARE APPLICABLE NOT ONLY TO THE AMOUNT WHICH IS SHOWN A S PAYABLE ON THE DATE OF BALANCE-SHEET, BUT IT IS APPLICABLE TO SUC H EXPENDITURE, WHICH BECOME PAYABLE AT ANY TIME DURING THE RELEVANT PRE VIOUS YEAR AND WAS 16 ACTUALLY PAID WITHIN THE PREVIOUS YEAR. IN THE RES ULT THE QUESTION IS DECIDED IN FAVOUR OF REVENUE AND AGAINST THE ASSES SEE. BEFORE DEALING WITH THE SUBMISSIONS OF THE LEARNED COUNSEL APPEARING FOR THE ASSESSEES IN BOTH THE APPEALS WE HAVE TO EXAMINE THE CORRECTNESS OF THE MAJORITY VIEWS IN THE CASE OF ME RILYN SHIPPING. WE ALREADY HAVE QUOTED EXTENSIVELY BOTH THE MAJORIT Y AND THE MINORITY VIEWS EXPRESSED IN THE AFORESAID CASE. THE MAIN THRUST OF THE MAJORITY VIEW IS BASED ON THE FACT THAT THE LEGISL ATURE HAS REPLACED THE EXPRESSION AMOUNTS CREDITED OR PAID WITH THE EXPRESSION PAYABLE IN THE FINAL ENACTMENT. COMPARISON BETWEEN THE PRE-AMENDMENT AND POST AMEND MENT LAW IS PERMISSIBLE FOR THE PURPOSE OF ASCERTAINING THE MISCHIEF SOUGHT TO BE REMEDIED OR THE OBJECT SOUGHT TO BE ACHIEVED BY AN AMENDMENT. THIS IS PRECISELY WHAT WAS DONE BY THE APEX COURT I N THE CASE OF CIT VS. KELVINATOR REPORTED IN 2010(2) SCC 723. BUT THE SAME OMPARISON BETWEEN THE DRAFT AND THE ENACTED LAW IS NOT PERMIS SIBLE. NOR CAN THE DRAFT OR THE BILL BE USED FOR THE PURPOSE OF REGULA TING THE MEANING AND PURPORT OF THE ENACTED LAW. IT IS THE FINALLY ENACT ED LAW WHICH IS THE WILL OF THE LEGISLATURE. THE LEARNED TRIBUNAL FELL INTO AN ERROR IN NOT REAL IZING THIS ASPECT OF THE MATTER. THE LEARNED TRIBUNAL HELD THAT WHERE LANGUAGE IS C LEAR THE INTENTION OF THE LEGISLATURE IS TO BE GATHERED FROM THE LANGUAGE USED. HAVING HELD SO, IT WAS NOT OPEN TO SEEK TO INTERPRE T THE SECTION ON THE BASIS OF ANY COMPARISON BETWEEN THE DRAFT AND THE S ECTION ACTUALLY ENACTED NOR WAS IT OPEN TO SPECULATE AS TO THE EFFE CT OF THE SO-CALLED REPRESENTATIONS MADE BY THE PROFESSIONAL BODIES. THE LEARNED TRIBUNAL HELD THAT SECTION 40(A)(IA) O F THE ACT CREATES A LEGAL FICTION BY VIRTUE OF WHICH EVEN THE GENUINE AND ADMISSIBLE EXPENSES CLAIMED BY AN ASSESSEE UNDER TH E HEAD INCOME FROM BUSINESS AND PROFESSION IF THE ASSESSEE DOES NOT DEDUCT TDS ON SUCH EXPENSES ARE DISALLOWED. 17 HAVING HELD SO WAS IT OPEN TO THE TRIBUNAL TO SEEK TO JUSTIFY THAT THIS FICTION CANNOT BE EXTENDED ANY FURTHER AND, T HEREFORE, CANNOT BE INVOKED BY ASSESSING OFFICER TO DISALLOW THE GENUIN E AND REASONABLE EXPENDITURE ON THE AMOUNTS OF EXPENDITURE ALREADY P AID? DOES THIS NOT AMOUNT TO DELIBERATELY READING SOMETHING IN THE LAW WHICH IS NOT THERE? WE, AS SUCH, HAVE NO DOUBT IN OUR MIND THAT THE LEA RNED TRIBUNAL REALIZED THE MEANING AND PURPORT OF SECTIO N 40(A)(IA) CORRECTLY WHEN IT HELD THAT IN CASE OF OMISSION TO DEDUCT TAX EVEN THE GENUINE AND ADMISSIBLE EXPENSES ARE TO BE DISALLOWE D. BUT THEY SOUGHT TO REMOVE THE RIGOUR OF THE LAW BY HOLDING T HAT THE DISALLOWANCE SHALL BE RESTRICTED TO THE MONEY WHICH IS YET TO BE PAID. WHAT THE TRIBUNAL BY MAJORITY DID WAS TO SUPPLY THE CASUS OMISSUS WHICH WAS NOT PERMISSIBLE AND COULD ONLY HAVE BEEN DONE BY THE SUPREME COURT IN AN APPROPRIATE CASE. REFERENCE IN THIS REGARD MAY BE MADE TO THE JUDGMENT IN THE CASE OF BHUWALKA STE EL INDUSTRIES VS. BOMBAY IRON & STEEL LABOUR BOARD REPORTED IN 2010 ( 2) SCC 273. UNPROTECTED WORKER WAS FINALLY DEFINED IN SECTIO N 2 (II) OF THE MATHADI ACT AS FOLLOWS:- UNPROTECTED WORKER MEANS A MANUAL WORKER WHO IS ENGAGED OR TO BE ENGAGED IN ANY SCHEDULED EMPLOYMENT. THE CONTENTION RAISED WITH REFERENCE TO WHAT WAS TH ERE IN THE BILL WAS REJECTED BY THE SUPREME COURT BY HOLDING A S FOLLOWS:- IT MUST, AT THIS JUNCTURE, BE NOTED THAT IN SPITE OF SECTION 2(11), WHICH INCLUDED THE WORDS BUT FOR THE PROVISIONS OF THIS ACT IS NOT ADEQUATELY PROTECTED BY LEGISLATION FOR WELFARE AND BENEFITS O F THE LABOUR FORCE IN THE STATE, THESE PRECISE WORDS WERE REMOVED BY THE LEGISLATURE AND THE DEFINITION WAS MADE LIMITED AS IT HAS BEEN FINALLY LEGISLATED UPON. IT IS TO BE NOTED THAT WHEN THE BILL CAME TO BE PASSED AND RECEIVED THE ASSENT OF THE VICE- PRESIDENT ON 05-06-1969 AND WAS FIRST PUBLISHED IN THE MAHARASHTRA GOVERNMENT GAZETTE EXTRAORDINARY, PART IV ON 13-06-1969, THE AFOREMENTIONED WORDS WERE OMITTED. THEREFORE, THIS WOULD BE A CLEAR POINTER TO THE LEGISLATIVE INTENT THAT THE LEGISLATURE BEING CONSC IOUS OF THE FACT AND BEING ARMED WITH ALL THE COMMITTEE REPORTS AND ALSO BEING ARMED 18 WITH THE FACTUAL DATA, DELIBERATELY AVOIDED THOSE W ORDS. WHAT THE APPELLANTS ARE ASKING WAS TO READ IN THAT DEFINITIO N, THESE PRECISE WORDS, WHICH WERE CONSCIOUSLY AND DELIBERATELY OMITTED FRO M THE DEFINITION. THAT WOULD AMOUNT TO SUPPLYING THE CASUS OMISSUS AND WE DO NOT THINK THAT IT IS POSSIBLE, PARTICULARLY, IN THIS CASE. THE LAW OF SUPPLYING THE CASUS OMISSUS BY THE COURTS IS EXTREM ELY CLEAR AND SETTLED THAT THOUGH THIS COURT MAY SUPPLY THE CASUS OMISSUS, IT WOULD BE IN THE RAREST OF THE RARE CASE AND THUS SUPPLYIN G OF THIS CASUS OMISSUS WOULD BE EXTREMELY NECESSARY DUE TO THE INA DVERTENT OMISSION ON THE PART OF THE LEGISLATURE. BUT, THAT IS CERTAI NLY NOT THE CASE HERE. WE SHALL NOW ENDEAVOUR TO SHOW THAT NO OTHER INTERP RETATION IS POSSIBLE. THE KEY WORDS USED IN SECTION 40(A)(IA), ACCORDING TO US, ARE ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVI I B. IF THE QUESTION IS WHICH EXPENSES ARE SOUGHT TO BE DISALLOWED? TH E ANSWER IS BOUND TO BE THOSE EXPENSES ON WHICH TAX IS DEDUCTIBLE AT SO URCE UNDER CHAPTER XVII B. ONCE THIS IS REALIZED NOTHING TURNS ON THE BASIS OF THE FACT THAT THE LEGISLATURE USED THE WORD PAYABLE AND NOT PAID OR CREDITED. UNLESS ANY AMOUNT IS PAYABLE, IT CAN NEITHER BE PAID NOR CREDITED. IF AN AMOUNT HAS NEITHER BEEN PAID NOR CREDITED, THERE CAN BE NO OCCASION FOR CLAIMING ANY DEDUCTION. THE LANGUAGE USED IN THE DRAFT WAS UNCLEAR AND SUSC EPTIBLE TO GIVING MORE THAN ONE MEANING. BY LOOKING AT THE DRAFT IT C OULD BE SAID THAT THE LEGISLATURE WANTED TO TREAT THE PAYMENTS MADE OR CR EDITED IN FAVOUR OF A CONTRACTOR OR SUB-CONTRACTOR DIFFERENTLY THAN THE P AYMENTS ON ACCOUNT OF INTEREST, COMMISSION OR BROKERAGE, FEES FOR PROFESS IONAL SERVICES OR FEES FOR TECHNICAL SERVICES BECAUSE THE WORDS AMOUNTS CREDITED OR PAID WERE USED ONLY IN RELATION TO A CONTRACTOR OR SUB- CONTRACTOR. THIS DIFFERENTIAL TREATMENT WAS NOT INTENDED. THEREFORE, THE LEGISLATURE PROVIDED THAT THE AMOUNTS, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B PAYABLE ON ACCOUNT OF INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES OR TO A CONTRACTOR OR SUB CONTRACTOR SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME OF AN ASSESSEE IN CASE HE HAS NOT DEDUCED, OR AFTER DEDUCTION HAS NOT PAID WITHIN THE SPECIFIED TIME. THE LANGUAGE USED BY THE LEGISLATURE IN THE FINALLY ENACTED LAW IS CLEAR 19 AND UNAMBIGUOUS WHEREAS THE LANGUAGE USED IN THE BILL WAS AMBIGUOUS. A FEW WORDS ARE NOW NECESSARY TO DEAL WITH THE SUBM ISSION OF MR. BAGCHI AND MS. ROYCHOWDHURI. THERE CAN BE NO DENIAL THAT THE PROVISION IN QUESTION IS HARSH. BUT THAT IS NO GROUND TO READ THE SAME IN A MANNER WHICH WAS NOT INTENDED BY THE LEGISLATURE. THIS IS OUR ANSWER TO THE SUBMISSION OF MR. BAGCHI. THE SUBMISSION OF MS. ROYCHOWDHURI THAT THE SECOND PROVISO SOUGHT TO BECOME EFFECTIVE FROM 1ST APRIL, 2013 SHOULD BE HELD TO HAVE ALREADY BECOME OPERATIVE PRIOR TO THE APPOINTED DATE CANNOT ALSO BE ACCEDED TO FOR THE SAME REASON INDICATED ABOVE. THE LAW WAS DELIBERATELY MADE HARSH TO SECURE COMPLIANCE OF THE PROVISIONS REQUIRING DEDUCTIONS OF TAX AT SOURCE. IT IS NOT THE CASE OF AN INADVERTENT ERROR. FOR THE REASONS DISCUSSED ABOVE, WE ARE OF THE OPIN ION THAT THE MAJORITY VIEWS EXPRESSED IN THE CASE OF MERILYN SHI PPING & TRANSPORTS ARE NOT ACCEPTABLE. THE SUBMISSIONS ADVANCED BY LEARNED ADVOCATES HAVE ALREADY BEEN DEALT WITH AND REJECTED. THE APPEAL IS, THUS, ALLOWED IN FAVOUR OF THE REVE NUE. 16. IT WOULD BE RELEVANT TO DEAL WITH THE ARGUMENT S OF THE LD. COUNSEL OF THE ASSESSEE WHICH WERE PRESSED REPEATEDLY THAT TH E PROVISIONS OF SECTION 28 STAND ALONE, GRANT THE ALLOWANCE TO THE ASSESSEE AND THIS CLAIM HAS BEEN MADE VALIDLY THUS ELIGIBLE FOR ALLOWANCE NEVERTHELE SS NO DEDUCTION OF TAX MADE. IN THIS CONTEXT, WE REFER THAT THE SAID ARGU MENTS BY LD. AR ARE BEREFET OF MERITS AND SUBSTANCE SINCE THE ACT HAS T O BE READ AS AN INTEGRATED CODE AND NOT TO THE CHOICE OF THE ASSESSEE BEING PICK AND CHOOSE TO THE PROVISIONS OF LAW SUITING THE REQUIREMENTS OF A LIT IGANT ANDS THE SIMILAR 20 ARGUMENT HAS BEEN DEALT IN THE AFORESAID JUDGMENT O F HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDIC ATE (SUPRA) AND WHICH FINDINGS ARE WHILE NOTICING THE JUDGMENT OF HONBLE SUPREME COURT IN A.S. KRISHNA VS. STATE OF MADRAS REPORTED IN AIR 1957 SC C 297 (SUPRA). 17. THAT THE SAID ARGUMENT IS HEREBY REJECTED AND E VEN THE HONBLE SUPREME COURT IN THE CASE OF V.N. SHRIKHANDE (DR.) VS. ANITA SENA FERNANDES (2011) 1 SCC 53 AT PARA 22 WHILE NOTICING THE JUDGMENT IN THE CASE OF RBI V. PEERLESS GENERAL FINANCE & INVESTMEN T CO. LTD; (1987) 1SCC 450 AT PARA 33 WHERE IT HAS BEEN HELD AS UNDER : IN RBI VS. PEERLESS GENERAL FINANCE & INVESTMENT C O. LTD. CHENNAPA REDYY, J. REFERRED TO THE RULE OF CONTEXTU AL INTERPRETATION AND OBSERVED : (SCC P.450 PARA 33): 33. INTERPRETATION MUST DEPEND ON TH TEXT AND THE CONTEXT. THEY ARE THE BASES OF INTERPRETATION. ONE MAY WELL SAY IF TH E TEXT IS THE TEXTURE, CONTEXT IS WHAT GIVES THE COLOUR. NEITHER CAN BE IG NORED. BOTH ARE IMPORTANT. THAT INTERPRETATION IS BEST WHICH MAKES THE TEXTUAL INTERPRETATION MATCH THE CONTEXTUAL. A STATUTE IS B EST INTERPRETED WHEN WE KNOW WHY IT WAS ENACTED. WITH THIS KNOWLEDGE, TH E STATUTE MUST BE READ FIRST AS A WHOLE AND THEN SECTION BY SECTIO N, CLAUSE BY CLAUSE, PHRASE BY PHRASE AND WORD BY WORD. IF A STATUTE IS LOOKED AT, IN THE CONTEXT OF ITS ENACTMENT, WITH THE GLASSES OF THE S TATUTE MAKER, PROVIDED BY SUCH CONTEXT, ITS SCHEME, THE SECTIONS, CLAUSES, PHRASES AND WORDS MAY TAKE COLOUR AND APPEAR DIFFERENT THA N WHEN THE STATUTE IS LOOKED AT WITHOUT THE GLASSES PROVIDED BY THE CO NTEXT. WITH THESE GLASSES, WE MUST LOOK AT THE ACT AS A WHOLE AND DIS COVER WHAT EACH SECTION, EACH CLAUSE, EACH PHRASE AND EACH WORD IS MEANT AND 21 DESIGNED TO SAY AS TO FIT INTO THE SCHEME OF THE EN TIRE ACT. NO PART OF A STATUTE AND NO WORD OF A STATUTE CAN BE CONSTRUED I N ISOLATION. 18. FURTHER, WE SHALL ADD THAT PROVISIONS OF SECTIO N 28 ARE CONFINED TO CHARGING OF INCOMES UNDER THE HEAD PROFITS AND GAI NS OF BUSINESS OR PROFESSION AND IT IS MOST PERTINENT TO REFER THAT THE PROVISIONS OF SECTION 29 REFERS TO THE METHODOLOGY OF COMPUTING THE SAID CHA RGE FOR COVERING THE PROVISION CONTAINED IN SECTION 30 TO 43D, WHEREIN T HE SAID PROVISION U/S 40(A)(IA) IS INCLUSIVE THEREIN. AND IT IS EVEN OTHE RWISE RELEVANT TO MENTION THAT THE PROVISIONS OF SECTION 40 OPEN WITH WORD NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION 30 TO 38 WHEREIN THE AM OUNTS NOT DEDUCTIBLE ARE REFERRED TO U/S 40(A)(IA). THE SAID PROVISION COMME NCE WITH NON-OBSTANTE CLAUSE AND REFER THE PROVISION U/S 30 TO 38 WITH WH ERE INTO UNDER THE GENERAL CLAIM OF THE EXPENSES, THE SAID ALLOWANCE NOT TO BE GRANTED, SPECIFICALLY WHERE A SPECIAL PROVISION FOR DISALLOWANCE HAS BEEN EXTRACTED UNDER THE STATUTE. 19. THEREFORE, IN VIEW OF OUR FINDINGS HEREINABOVE, GROUNDS RAISED BY THE ASSESSEE IN ITS C.O. AND HAVE NO MERIT AND THEREFOR E, THE SAME ARE DISMISSED AND THE APPEAL OF THE REVENUE IS ALLOWED. 22 20. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.326(ASR)/2010 IS ALLOWED AND C.O. NO.19(ASR)/2010 OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH MAY, 2013. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30TH MAY, 2013 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. MAHABIR COTTON TRADERS, BHUCHO MA NDI 2. THE ITO WARD 2(1), BATHINDA. 3. THE CIT(A), BATHINDA. 4. THE CIT, BATHINDA. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.