M/s Rana Sugars Ltd, Chandigarh V. DCIT, Chandigarh

CO 20/CHANDI/2011

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9814 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 5 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-05-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 15-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: JYOTI KUMARI
• Keywords: Depreciation; Search and seizure; Period of limitation; Proportionate interest; Question of law; Non passing of speaking order; Right to appeal; Notional interest
• Section: 56; 2; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 48/CHD/2011 ASSESSMENT YEARS : 2006-07 D.C.I.T. CIRCLE 1(1) V M/S RANA SUGARS LTD CHANDIGARH SCO 49-50, SEC 8C CHANDIGARH AABCR 6744C CROSS OBJECTIONS NO. 20/CHD/2011 ARISING OUT OF ITA NO. 48/CHD/2011 ASSESSMENT YEARS : 2006-07 M/S RANA SUGARS LTD V D.C.I.T. CIRCLE 1(1) SCO 49-50, SEC 8C CHANDIGARH CHANDIGARH AABCR 6744C (APPELLANT) (RESPONDENT) REVENUE BY: SMT. JYOTI KUMARI RESPONDENT BY: SHRI T .N. SINGLA DATE OF HEARING 24.7.2014 DATE OF PRONOUNCEMENT 08.8.2014 O R D E R PER T.R. SOOD, A.M THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER DATED 17.8.2010 OF THE LD CIT(A), CHANDIGARH. THE A SSESSEE HAS RAISED CROSS OBJECTIONS AGAINST THIS APPEAL. 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS: 1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE AO ON ACCOUNT OF PRIOR PERIOD EXPENSES OF RS. 238344/-. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF NOTIONAL INTEREST ON LAND PURCHASES D URING THE YEAR AMOUNTING TO RS. 429629/- 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 55 6641/- MADE BY THE A.O. BY TREATING EMPLOYEES CONTRIBUTION TOWARDS EPF AS INCOME AS PER 2 PROVISIONS OF SECTION 2(24)(X) AND NOT ALLOWING DED UCTION OF THE SAME AS PER SECTION 36(1)(VA) OF THE INCOME TAX ACT, 1961. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE .O. ON ACCOUNT OF DEPRECIATION ON ELECTRIC INSTALLATION AMOUNTING TO RS. 68219/-. 3 GROUND NO. 1 - AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN PRIOR PERIOD INCOME OF RS. 618088/- BUT OUT OF SAME THE ASSESSEE HAS REDUCED P RIOR PERIOD EXPENSES OF RS. 238344/- AND NET INCOME WAS CREDITED TO PROFIT AND LOSS ACCOUNT. ON ENQUIRY IT WAS SUBM ITTED THAT PRIOR PERIOD EXPENSES RELATED TO MEDICAL EXPENSES A MOUNTING TO RS. 9265/-, SALARY WAGES 167837/- AND TRAVELIN G EXPENSES 61240/-. HOWEVER, ACCORDING TO THE ASSESSING OFF ICER NOTHING WAS SAID ABOUT ALLOWABILITY OF THESE EXPENS ES AND THEREFORE THE ASSESSING OFFICER DISALLOWED A SUM OF RS. 238344/-. 4 ON APPEAL THE LD. CIT(A) REFERRED TO THE DECISION OF HON'BLE GUJARAT HIGH COURT IN CASE OF SAURASHTRA CE MENT AND CHEMICAL INDUSTRIES LTD. V CIT, 213 ITR 523 AND HON 'BLE BOMBAY HIGH COURT IN CASE OF CIT V NAGRI MILLS CO. LTD. 34 ITR 681 AND DELETED THE ADDITION. 5 BEFORE US. LD. D.R FOR THE REVENUE RELIED ON THE ORDER OF THE ASSESSING OFFICER. 6 ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE SUBMITTED THAT DETAIL OF EXPENSES WAS FURNISHED (CO PY OF WHICH IS AVAILABLE AT PAGE 11 OF PAPER BOOK). HE SUBMITT ED THAT SOMETIMES VOUCHERS ARE SUBMITTED LATE BY THE EMPLOY EES AND THEREFORE PROPER ENTRIES CANNOT BE PASSED. IN ANY CASE THE ASSESSEE HAS ALSO INCOME OF PRIOR PERIOD AND EVEN A FTER 3 ADJUSTING THE EXPENSES NET RESULT WAS INCOME THEREF ORE THERE IS NO QUESTION OF DISALLOWING EXPENSES. 7 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND F ORCE IN THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE . NORMALLY PRIOR PERIOD EXPENSES CANNOT BE ALLOWED BECAUSE THE INCOME HAS TO BE DETERMINED ON YEARLY BASIS. HOWEVER, IN THIS CASE CERTAIN INCOME RELATING TO PRIOR PERIOD WAS ALSO OF FERED TO TAX AND EVEN AFTER ADJUSTING THE EXPENSES OF RS. 238344 /- NET AMOUNT RESULTED IN INCOME BECAUSE PRIOR PERIOD INCO ME WAS RS. 618088/-. IN SUCH SITUATION WE ARE OF THE OPIN ION THAT EXPENDITURE HAS BEEN RIGHTLY ALLOWED BY THE LD. CIT (A). ACCORDINGLY WE CONFIRM THE ORDER OF THE LD. CIT(A) . 8 GROUND NO. 2 - AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS PURCHASED SOME LAND FOR EXTEN SION OF EXISTING BUSINESS DURING THE YEAR. FROM THE DETAIL S OF PURCHASE, IT WAS NOTICED THAT THERE WAS A TIME GAP BETWEEN THE PAYMENT AND REGISTRATION OF THE LAND. THEREFORE TH E ASSESSEE WAS ASKED WHY PROPORTIONATE INTEREST SHOULD NOT BE DISALLOWED IN VIEW OF THE PROVISO TO SEC 36(1)(III). IN RESPO NSE IT WAS MAINLY STATED THAT THE LAND WAS PURCHASED FROM INTE RNAL ACCRUAL AND NO LOAN WAS TAKEN FOR THE SAME. THE ASSESSING OFFICER REJECTED THIS CONTENTION BY OBSERVING THAT THE ASSE SSEE HAD MIXED FUNDS AND IT IS NOT POSSIBLE TO SEGREGATE THE S ME. IN THESE CIRCUMSTANCES THE ASSESSING OFFICER CALCULATE D THE PROPORTIONATE NOTIONAL INTEREST AND DISALLOWED THE INTEREST OF RS. 429609/-. 4 9 ON APPEAL THE SUBMISSIONS MADE BEFORE THE ASSESSI NG OFFICER WERE REITERATED BEFORE THE LD. CIT(A). SHE FOUND MERIT IN THE SAME AND OBSERVED THAT THE ASSESSEE HAS NOT TAKEN ANY LOAN FOR PURCHASE OF LAND, THEREFORE DISALLOWANCE W AS NOT JUSTIFIED AND ADDITION WAS DELETED BY HER. 10 BEFORE US. THE LD. D.R FOR THE REVENUE SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 11 ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE SUPPORTED THE IMPUGNED ORDER. 12 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT AFTER REPRODUCING THE PROVISIONS OF SECTION 36(1)(III) T HE LD. CIT(A) DECIDED THIS ISSUE VIDE PARA 18 WHICH IS AS UNDER: 18. IN THIS CASE, THE A.O. NO WHERE TRIED TO ESTABL ISH THAT THE APPELLANT HAS TAKEN LOAN FOR THE PURCHASE OF LAND A ND HAS PAID INTEREST THEREON. IT IS QUITE CLEAR THAT IF ANY SECURED LOAN IS TAKEN FOR ANY FIXED ASSET PROPER AGREEMENT IS DONE AND HYPOTHECATION OF THE ASSETS PURCHASED AGAINST THE LOAN IS ALSO MADE. THUS, IF T HE APPELLANT HAD PURCHASED LAND FROM BORROWED FUNDS, SUCH DOCUMENTS WOULD BE THERE WHICH COULD CLEARLY ESTABLISH PAYMENT OF INTEREST. THE PROVISIONS OF SECTION 36(1)(III) WOULD BECOME APPLICABLE ONLY WHE N THE INTEREST IS PAID IN RESPECT OF CAPITAL BORROWED, BUT WHEN NO CAPITAL IS BORROWED THE QUESTION OF DISALLOWING THE INTEREST WOULD NOT ARIS E. THE AO HELD THAT ASSESSEE IS USING INTEREST BEARING FUNDS FOR ITS B USINESS. ALTHOUGH IT IS HAVING NON INTEREST BEARING FUNDS ALSO HOWEVER IT I S NOT POSSIBLE TO SEGREGATE USAGE OF SUCH FUNDS FOR A PARTICULAR PURP OSE. ON THE BASIS OF THIS VAGUE FINDING AO COMPUTED NOTIONAL INTEREST AM OUNTING TO RS. 4,29,609/- WHICH IS NOT JUSTIFIED. THUS, IN THE ABS ENCE OF ANY COGENT FINDINGS REGARDING THE PAYMENT OF INTEREST ON BORRO WED CAPITAL, THE ADDITION OF RS. 429609/- ON ACCOUNT OF NOTIONAL INT EREST CANNOT BE SUSTAINED. THE ADDITION IS THEREFORE DELETED, ALLOW ING ASSESSEES 4 TH GROUND OF APPEAL. IN OUR OPINION, THE LD. CIT(A) RIGHTLY DECIDED THE ISSUE BECAUSE THE ASSESSING OFFICER HAS NOT SHOWN THAT ANY AMOUNT WAS BORROWED FOR PURCHASE OF LAND. FURTHER IN CASE OF L AND THERE IS ALWAYS GAP BETWEEN THE PAYMENT AND REGISTRATION OF THE SALE DEED AND SUCH GAP CAN NOT LEAD TO THE CONCLUSION TH AT THE LAND HAS NOT BEEN CAPITALIZED. IN VIEW OF THIS WE CONFI RM THE ACTION OF THE LD. CIT(A). 5 13 GROUND NO. 3 - AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS MADE CERTAIN PAYMENTS TOWARDS PROVIDENT FUND WHICH ARE LATE. THE ASSESSING OFFICE R INVOKED THE PROVISIONS OF SECTION 36(1)(VA) AND DISALLOWED A SUM OF RS. 556641/-. 14 ON APPEAL THE LD. CIT(A) DELETED THE ADDITION BY FOLLOWING DECISION OF HON'BLE HIGH COURT OF PUNJAB & HARYANA IN CASE OF CIT V NUCHEM LTD. ITA NO. 323 OF 2009. 15 BEFORE US. THE LD. D.R FOR THE REVENUE SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND ON THE OTHER HAN D, THE LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE IMPUGNED ORD ER. 16 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THIS ISSUE IS SQUARELY COVERED AGAINST THE REVENUE AND IN FAVO UR OF THE ASSESSEE BY THE DECISION OF HON'BLE HIGH COURT OF P UNJAB & HARYANA IN CASE OF CIT V NUCHEM LTD. ITA NO. 323 O F 2009 WHEREIN FOLLOWING DECISION OF HON'BLE SUPREME COURT IN CASE OF CIT V. ALOM EXTRUSIONS LTD. 319 ITR 306 (S.C) IT WAS HELD THAT IF THE PAYMENTS HAVE BEEN MADE BEFORE THE DUE DATE OF FILING OF RETURN THEN SUCH PAYMENTS HAVE TO BE ALLO WED. PERUSAL OF THE ASSESSMENT ORDER CLEARLY SHOW THAT PROVIDENT FUND DUES WERE PAID BEFORE THE DUE DATE OF FILING OF RETURN W HICH HAVE BEEN REPRODUCED BY THE ASSESSING OFFICER AT PARA 13 AND 14. THEREFORE WE FIND NOTHING WRONG IN THE ORDER OF CIT (A) AND CONFIRM THE SAME. 17 GROUND NO. 4 - AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ASSESSEE HAD CLAIMED DEPRECIATION @ 25% IN RESP ECT OF 6 ELECTRICAL EQUIPMENTS WHICH WAS REDUCED TO 10% BY F OLLOWING EARLIER ASSESSMENT YEAR . 18 ON APPEAL THE LD. CIT(A) FOLLOWING THE DECISION OF THE TRIBUNAL IN CASE OF ACIT V RANA POLYCOT LTD. ITA NO . 26/CHD/2007, DELETED THE ADDITION. 19 BEFORE US. THE LD. D.R FOR THE REVENUE SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 20 ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT IN THE CASE OF SISTER CONCERN OF THE ASSESSEE M/S RANA POLYCOT LTD., THE TRIBUNAL HAS HELD IN ITA NO. 1016/CHD/2008 THAT EVEN ON ELECTRICAL INSTALLATIONS , THE DEPRECIATION IS TO BE ALLOWED @ 25%. 21 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THE TRIBUNAL HAS ALREADY HELD IN CASE OF DCIT V. M/S R ANA POLYCOT LTD. (SUPRA) THAT EVEN ON ELECTRICAL INSTALLATIONS DEPRECIATION IS TO BE ALLOWED @ 25%. IN VIEW OF THIS ORDER WHICH H AVE BEEN FOLLOWED BY THE LD. CIT(A), WE CONFIRM HER ORDER. 22 IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. CROSS OBJECTIONS NO. 20/CHD/2011 23 IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS: 1 THAT THE LEARNED CIT(A) HAS WRONGLY DISALLOWED THE HIRE CHARGES AMOUNTING TO RS. 4,98,949/- PAID FOR VEHICLES TO VA RIOUS COMPANIES U/S 40(A)(IA) OF THE ACT. 2 THAT THE LEARNED CIT(A) HAS WRONGLY DISALLOWED PA RT OF REPAIR AND MAINTENANCE EXPENSES ON BUILDING AMOUNTING TO RS. 3 ,50,475/-. 7 24 GROUND NO. 1 - AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS MADE FOLLOWING PAYMENTS OF IN TEREST: NAME AMOUNT M/S. SHEBA PROPERTIES 86,182/- INTT. ON TRUCK LOAN M/S CHOLA MANDLAM 2,35,430/- INTT. ON VEHICLE LOAN M/S. TATA FINANCE 1,77,237/- INTT ON TRUCK LOAN TOTAL 4,98,949/- NO TAX WAS DEDUCTED ON THESE PAYMENTS AND IN RESPON SE TO THE QUESTIONNAIRE DATED 12.8.2008 IT WAS ADMITTED THAT TAX WAS NOT DEDUCTED ON THESE PAYMENTS, THEREFORE THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 40A(IA) AND ADDE D THIS AMOUNT TO THE INCOME OF THE ASSESSEE. 25 ON APPEAL ACTION OF THE ASSESSING OFFICER WAS CO NFIRMED BY THE LD. CIT(A). 26 BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THESE AMOUNTS WERE ALREADY PAID AND THEREFORE PROVISIONS OF SECTION 40A(IA) WERE NOT ATTRACTED BECAUSE SAME CAN BE ATTRACTED IF THE AMOUNT WAS PAYABLE. IN THIS REGAR D HE REFERRED TO THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN CASE OF CIT V. VECTOR SHIPPING SERVICES (P) LTD, ITA NO. 122/20 13. HE FURTHER SUBMITTED THAT SLP FILED BY THE REVENUE AGA INST THIS DECISION HAS ALREADY BEEN DISMISSED BY THE HON'BLE SUPREME COURT AND IN THIS REGARD FILED A COPY OF THE ORDER OF THE HON'BLE SUPREME COURT . 27 ON THE OTHER HAND, THE LD. D.R. FOR THE REVENUE STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). SHE ALSO RE FERRED TO THE DECISION OF CHANDIGARH BENCH OF THE TRIBUNAL WHEREI N CHANDIGARH BENCH HAS FOLLOWED THE DECISION IN CASE OF CIT V. SIKANDARKHAN N. TUNVAR & ORS, 87 DTR 137 AND HAS 8 DISTINGUISHED THE DECISION OF CIT V. VECTOR SHIPPIN G SERVICES (P) LTD (SUPRA) IN CASE OF HI TECH FOODS V ITO IN I TAS NO. 987, 988 & 989/CHD/2011. 28 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. WE FIND THAT HON'BLE GUJARAT HIGH COURT IN CASE OF CIT V. SIKANDARKHAN N. TUNVAR & ORS, SUPRA) HAS HELD THAT PROVISIONS OF SECTION 40A(IA) ARE APPLICABLE WHERE THE AMOUNT HAS BEEN PAID OR REMAIN PAYABLE. IN CONTRAST HON'BLE ALLAHA BAD HIGH COURT IN CASE OF CIT V. VECTOR SHIPPING SERVICES ( P) LTD (SUPRA), HAS FOLLOWED THE DECISION OF SPECIAL BENCH IN CASE OF MERILIN SHIPPING & TRANSPORT V ADDL CIT, 136 ITD 23 (VISAKHAPATNAM)(SB). BOTH THESE DECISIONS WERE CONS IDERED BY US IN CASE OF HI TECH FOODS V ITO (SUPRA) AND IT WA S OBSERVED AT PARA 22 TO 27 AS UNDER: 22 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY AN D FIND THAT THE DECISION OF SPECIAL BENCH HAS BEEN SPECIFICALL Y OVER RULED BY HON'BLE GUJARAT HIGH COURT BY DISCUSSING THE ISSUE IN DETAIL IN CASE OF CIT V. SIKANDARKHAN N TUNWAR AND OTHERS (SU PRA). WE FURTHER FIND THAT IN CASE OF CIT V. VECTOR SHIPPING SERVICES, THE ISSUE WAS DIFFERENT. IN THAT CASE THE QUESTION POS ED BEFORE THE HON'BLE HIGH COURT READS AS UNDER: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE HON'BLE ITAT HAS RIGHTLY CONFIRMED THE ORDER OF THE LD. CIT(A) AND THEREBY DELETING THE DISALLOWANCE OF RS. 1,17,68,62 1/- MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) OF THE IT ACT BY IG NORING THE FACT THAT THE COMPANY M/S MERCATOR LINES LTD. HAD PERFOR MED SHIP MANAGEMENT WORK ON BEHALF OF THE ASSESSEE M/S VECTO R SHIPPING SERVICES (P) LTD AND THERE WAS A MEMORANDUM OF UNDE RTAKING SIGNED BETWEEN BOTH THE COMPANIES AND A S PER THE D EFINITION OF MEMORANDUM OF UNDERTAKING, IT INCLUDED CONTRACT ALS O. IN THAT CASE SOME EXPENSES WERE DISALLOWED U/S 40(A )(IA) BECAUSE NOT TAX WAS DEDUCTED. ON APPEAL THE TRIBUNAL FOUND THAT THE LD. CIT(A) HAS ALREADY GIVEN A FINDING THAT MERCATOR LI NES LTD. HAD DEDUCTED THE TDS ON SALARY PAID ON BEHALF OF THE AS SESSEE. UNDER SUCH CIRCUMSTANCES THE ASSESSEE WAS NOT REQUIRED TO DEDUCT THE TDS ON REIMBURSEMENT ON SALARY BEING MADE BY IT TO M/S MERCATOR LINES LTD. 23 HON'BLE HIGH COURT HAS CONFIRMED THE DECISION OF THE TRIBUNAL. THUS IT IS CLEAR THAT HON'BLE ALLAHABAD HIGH COURT WAS NEITHER REQUIRED NOR HAS GIVEN DETAIL REASONS FOR APPROVING THE DECISION OF SPECIAL BENCH WHEREAS HON'BLE GUJARAT H IGH COURT HAS AFTER DETAILED DISCUSSION, OVER RULED THE DECISION OF SPECIAL BENCH. 9 24 IN CASE OF SIKANDARKHAN N TUNWAR (SUPRA) THE ASS ESSEE WAS ENGAGED IN THE BUSINESS OF TRANSPORT CONTRACTOR AND COMMISSION AGENT. DURING THE SCRUTINY ASSESSMENT IT WAS NOTI CED BY THE ASSESSING OFFICER THAT EXPENDITURE IN THE NATURE OF PAYMENT MADE BY THE ASSESSEE TO ITS SUB-CONTRACTORS TO THE TUNE OF RS. 8.74 CRORES. SINCE THE ASSESSEE HAD ADMITTEDLY NOT DEDU CTED THE TAX FROM SUCH PAYMENTS AND INDIVIDUAL PAYMENTS TO TRANS PORTERS EXCEEDED LIMIT OF RS. 20,000/- FOR A SINGLE TRIP AN D AGGREGATED OVER RS. 50,000/- IN THE YEAR THOUGH THE ASSESSEE H AD OBTAINED FORM NO. 15-I FROM SUCH SUB-CONTRACTORS BUT THE SAM E WERE NOT FURNISHED ALONG WITH THE PARTICULARS IN FORM 15-J T O THE CIT BEFORE DUE DATE AND THEREFORE, THE EXPENDITURE ON ACCOUNT OF PAYMENT TO SUB-CONTRACTORS WAS DISALLOWED BY INVOKING THE PROV ISIONS OF SECTION 40(A)(IA) OF THE ACT. 25. ON APPEAL THE LD. CIT(A) CONFIRMED THIS ORDER. 26 WHEN THE MATTER TRAVELED TO THE TRIBUNAL THE APP EAL OF THE ASSESSEE WAS ALLOWED BY RELYING ON THE DECISION OF MERILYN SHIPPING TRANSPORTERS V. ACIT (SUPRA). THE TRIBUNA L HELD THAT THE WORD PAYABLE USED IN SECTION 40(A)()IA) WOULD MAK E PROVISION APPLICABLE ONLY IN RESPECT OF EXPENDITURE PAYABLE ON 31 ST MARCH OF A PARTICULAR YEAR AND SUCH PROVISION CANNOT BE I NVOKED TO DISALLOW THE AMOUNTS WHICH HAS ALREADY BEEN PAID DU RING THE YEAR THOUGH THE TAX MAY NOT HAVE BEEN DEDUCTED AT SOURCE . FOLLOWING SPECIFIC QUESTION WAS POSED BEFORE THE HON'BLE HIGH COURT: IN ALL THESE APPEALS THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE SPECIAL BENCH IN THE CASE OF M/S MERILYN SHIPPING T RANSPORTERS V. ACIT (SUPRA) AND DELETED THE DISALLOWANCE ON THIS L IMITED GROUND. AS IN THE PRESENT CASE, OTHER MERILYN SHIPPING TRAN SPORTERS V. ACIT (SUPRA) GROUNDS OF CONTROVERSY BETWEEN THE PAR TIES WITH RESPECT TO ALLOWABILITY OR OTHERWISE OF SUCH EXPEND ITURE WAS NOT EXAMINED BY THE TRIBUNAL. FOR THE PURPOSE OF THESE APPEALS, THEREFORE, WE FRAME FOLLOWING SUBSTANTIAL QUESTION OF LAW: 1 WHETHER DISALLOWANCE U/S 40(A)(IA) OF THE I.T AC T COULD BE MADE ONLY IN RESPECT OF SUCH AMOUNTS WHICH ARE PAY ABLE AS ON 31 ST MACH OF THE YEAR UNDER CONSIDERATION? 2 WHETHER DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPING TRANSPORTERS V. ACIT ( SUPRA) LAYS DOWN CORRECT LAW? 27 HON'BLE GUJARAT HIGH COURT AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES REFERRED TO THE PRO VISION OF CHAPTER XVII A OF THE ACT DEALING WITH THE TAX DEDU CTION PROVISIONS. AFTER THIS REFERENCE WAS MADE TO SECTI ON 40(A)(IA) THROUGH WHICH IT WAS PROVIDED THAT TAX HAS NOT BEEN DEDUCTED ON CERTAIN PAYMENTS AND THE SAME WILL NOT BE ALLOWABLE . THE HON'BLE HIGH COURT DISCUSSED THE IMPLEMENTATIONS OF THIS PR OVISION AND DECISION OF SPECIAL BENCH IN CASE OF MERILYN SHIPPI NG TRANSPORTERS V. ACIT (SUPRA) AND OBSERVED AND HELD AS UNDER: 17. IN PLAIN TERMS SECTION 40(A)(IA) PROVIDES THAT IN CASE OF ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SER VICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONT RACTOR OR SUB-CONTRACTOR FOR CARRYING OUT ANY WORK ON WHICH TAX IS DEDUCTIBLE AT SOURCE A ND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION HAS NOT BEEN PAID BEFORE THE DUE DA TE, SUCH AMOUNTS SHALL NOT BE DEDUCTED IN COMPU TING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS A ND GAINS OF BUSINESS OR PROFESSION IRRESPECTIVE OF THE PROVISIO NS CONTAINED IN SECTIONS 30 TO 38 OF THE ACT. PROVISO TO SECTION 40(A)(IA), HOWEVER, ENA BLES THE ASSESSEE TO TAKE SUCH DEDUCTION IN SUBSEQUENT YEAR, IF TAX IS DEDUCTED IN SUCH YEAR OR THOUGH DEDUCTED DURING 10 THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECI FIED IN SUB-SECTION(1) OF SECTION 139 OF THE ACT. 18. IN SUCH CONTEXT, THEREFORE, THE QUESTION ARISES WHETHER UNDER SECTION 40(A)(IA) OF THE ACT DISALLOWANCE OF THE EXPENDITURE PAYMENT OF WHIC H, THOUGH REQUIRED DEDUCTION OF TAX AT SOURCE HAS NOT BEEN MADE WOULD BE CONFINED ONLY TO THOSE CASES WHERE THE AMOUNT REMAINS PAYABLE TILL THE END OF THE PREVIOUS YEAR O R WOULD INCLUDE ALL AMOUNTS WHICH BECAME PAYABLE DURING THE ENTIRE PREVIOUS YEAR. 19. DECISION IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) WAS RENDERED BY THE SPECIAL BENCH BY A SPLIT OPINION. L EARNED ACCOUNTANT MEMBER WHO WAS IN MINORITY, PLACED HEAVY RELIANCE ON A DECISION OF MADRAS HIGH COURT IN THE CASE OF TUBE INVESTMENTS OF INDIA LTD. AND ANOTHER VS. ASSI STANT COMMISSIONER OF INCOME- TAX (TDS) AND OTHERS REPORTED IN [2010] 325 ITR 610 (MAD) . LEARNED JUDGE DID NOTICE THAT THE HIGH COURT IN SUCH CASE WAS CONCERNED WITH THE VIRES OF THE STATUTORY PROVISION BUT FOUND SOME OF THE OBSERVATIONS MADE BY THE COUR T IN THE PROCESS USEFUL AND APPLICABLE. LEARNED JUDGE REJECTED THE THEORY OF NA RROW INTERPRETATION OF TERM PAYABLE AND OBSERVED AS UNDER: 12.4 IN OUR CONSIDERED OPINION, THERE IS NO AMBIGUI TY IN THE SECTION AND TERM PAYABLE CANNOT BE ASCRIBED NARROW INTERPRETATI ON AS CONTENDED BY ASSESSEE. HAD THE INTENTIONS OF THE LEGISLATURE WER E TO DISALLOW ONLY ITEMS OUTSTANDING AS ON 31 ST MARCH, THEN THE TERM PAYABLE WOULD HAVE BEEN QUALIFIED BY THE PHRASE AS OUTSTANDING ON 31 ST MARCH. HOWEVER, NO SUCH QUALIFICATION IS THERE IN THE SECTION AND, THEREFOR E, THE SAME CANNOT BE READ INTO THE SECTION AS CONTENDED BY THE ASSESSEE. 20. ON THE OTHER HAND, LEARNED JUDICIAL MEMBER SPEA KING FOR MAJORITY ADOPTED A STRICTER INTERPRETATION. HEAVY RELIANCE WAS PLACED ON THE FI NANCE BILL OF 2004, WHICH INCLUDED THE DRAFT OF THE AMENDMENT IN SECTION 40 AND THE ULTIMA TE AMENDMENT WHICH ACTUALLY WAS PASSED BY THE PARLIAMENT. IT WAS OBSERVED THAT FROM THE COMPARISON BETWEEN THE PROPOSED AND THE ENACTED PROVISION IT CAN BE SEEN T HAT THE LEGISLATURE HAS REPLACED THE WORDS AMOUNTS CREDITED OR PAID WITH THE WORD PAYABL E IN THE ENACTMENT. ON SUCH BASIS, IT WAS HELD THAT THIS IS A CASE OF CONSCIOUS OMISSION AND WHEN THE LANGUAGE WAS CLEAR THE INTENTION OF THE LEGISLATURE HAD TO BE GA THERED FROM LANGUAGE USED. IN THEIR OPINION THE PROVISION WOULD APPLY ONLY TO AMOUNTS W HICH ARE PAYABLE AT THE END OF THE YEAR. HAVING SAID SO, CURIOUSLY, IT WAS OBSERVED TH AT THE PROVISO TO SECTION 40(A)(IA) OF THE ACT LAYS DOWN THAT EARLIER YEAR S PROVISION CAN BE ALLOWED IN SUBSEQUENT YEARS ONLY IF TDS IS DEDUCTED AND DEPOSITED AND, THEREFORE, RE VENUE S FEAR IS UNFOUNDED AS THE PROVISION OF SECTION 40(A)(IA) OF THE ACT COVERS TH E SITUATION. 21. IN THE PRESENT CASE, WE HAVE NO HESITATION IN A CCEPTING THE CONTENTION THAT THE PROVISION MUST BE CONSTRUED STRICTLY. THIS BEING A PROVISION WHICH CREATES AN ARTIFICIAL CHARGE ON AN AMOUNT WHICH IS OTHERWISE NOT AN INCOM E OF THE ASSESSEE, CANNOT BE LIBERALLY CONSTRUED. UNDOUBTEDLY IF THE LANGUAGE OF THE SECTION IS PLAIN, IT MUST BE GIVEN ITS TRUE MEANING IRRESPECTIVE OF THE CONSEQUENCES. WE H AVE NOTICED THAT THE PROVISION MAKES DISALLOWANCE OF AN EXPENDITURE WHICH HAS OTHE RWISE BEEN INCURRED AND IS ELIGIBLE FOR DEDUCTION, ON THE GROUND THAT THOUGH TAX WAS RE QUIRED TO BE DEDUCTED AT SOURCE IT WAS NOT DEDUCTED OR IF DEDUCTED, HAD NOT BEEN DEPOSITED BEFORE THE DUE DATE. BY ANY INTENDMENT OR LIBERAL CONSTRUCTION OF SUCH PROVISIO N, THE LIABILITY CANNOT BE FASTENED IF THE PLAIN MEANING OF THE SECTION DOES NOT SO PERMIT. 22. FOR THE PURPOSE OF THE SAID SECTION, WE ARE ALS O OF THE OPINION THAT THE TERMS PAYABLE AND PAID ARE NOT SYNONYMOUS. WORD PAID HAS BEEN DEFINED IN SECTION 43(2) OF THE ACT TO MEAN ACTUALLY PAID OR INCURRED ACCORDING TO THE METHOD OF ACCOUNTING, UPON THE BASIS OF WHICH PROFITS AND GAINS ARE COMPU TED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION . SUCH DEFINITION IS APPLICABLE FOR THE PURPOSE OF SECTIONS 28 TO 41 UNLESS THE CONTEXT OTHERWISE REQU IRES. IN CONTRAST, TERM PAYABLE HAS NOT BEEN DEFINED. THE WORD PAYABLE HAS BEEN DESCRIB ED IN WEBSTER S THIRD NEW INTERNATIONAL UNABRIDGED DICTIONARY AS REQUIRING TO BE PAID: CAPABLE OF BEING PAID: SPECIFYING PAYMENT TO A PARTICULAR PAYEE AT A SPECI FIED TIME OR OCCASION OR ANY SPECIFIED MANNER. IN THE CONTEXT OF SECTION 40(A)(IA), THE WO RD PAYABLE WOULD NOT INCLUDE PAID . IN OTHER WORDS, THEREFORE, AN AMOUNT WHICH IS ALREADY PAID OVER CEASES TO BE PAYABLE AND CONVERSELY WHAT IS PAYABLE CANNOT BE ON E THAT IS ALREADY PAID. WHEN AS RIGHTLY POINTED OUT BY COUNSEL MR. HEMANI, THE ACT USES TERMS PAID AND PAYABLE AT DIFFERENT PLACES IN DIFFERENT CONTEXT DIFFERENTLY, FOR THE PURPOSE OF SECTION 40(A)(IA) OF THE ACT, TERM PAYABLE CANNOT BE SEEN TO BE INCLUDING TH E EXPRESSION PAID . THE TERM 11 PAID AND PAYABLE IN THE CONTEXT OF SECTION 40(A)(IA ) ARE NOT USED INTERCHANGABLY. IN THE CASE OF BIRLA CEMENT WORKS AND ANOTHER VS. STATE OF RAJASTH AN AND ANOTHER REPORTED IN AIR 1994(SC) 2393 , THE APEX COURT OBSERVED THAT THE WORD PAYABLE IS A DESCRIPTIVE WORD, WHICH ORDINARILY MEANS THAT WHICH MUST BE PAID OR IS DUE OR MAY BE PAID BUT ITS CORRECT MEANING CAN ONLY BE DETERMINED IF THE CONTEXT IN WHICH IT IS USED IS KEPT IN VIEW. THE WORD HAS BEEN FREQUENTLY UNDERSTO OD TO MEAN THAT WHICH MAY, CAN OR SHOULD BE PAID AND IS HELD EQUIVALENT TO DUE . 23. DESPITE THIS NARROW INTERPRETATION OF SECTION 4 0(A)(IA), THE QUESTION STILL SURVIVES IF THE TRIBUNAL IN CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) WAS ACCURATE IN ITS OPINION. IN THIS CONTEXT, WE WOULD LIKE TO E XAMINE TWO ASPECTS. FIRSTLY, WHAT WOULD BE THE CORRECT INTERPRETATION OF THE SAID PROVISION . SECONDLY, WHETHER OUR SUCH UNDERSTANDING OF THE LANGUAGE USED BY THE LEGISLATU RE SHOULD WAVER ON THE PREMISE THAT AS PROPOUNDED BY THE TRIBUNAL, THIS WAS A CASE OF C ONSCIOUS OMISSION ON PART OF THE PARLIAMENT. BOTH THESE ASPECTS WE WOULD ADDRESS ONE AFTER ANOTHER. IF ONE LOOKS CLOSELY TO THE PROVISION, IN QUESTION, ADVERSE CONSEQUENCES OF NOT BEING ABLE TO CLAIM DEDUCTION ON CERTAIN PAYMENTS IRRESPECTIVE OF THE PROVISIONS CONTAINED IN SECTIONS 30 TO 38 OF THE ACT WOULD FLOW IF THE FOLLOWING REQUIREMENTS ARE SA TISFIED:- (A) THERE IS INTEREST, COMMISSION OR BROKERAGE, REN T, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR BEING RESIDENT FOR CAR RYING OUT ANY WORK. (B) THESE AMOUNTS ARE SUCH ON WHICH TAX IS DEDUCTIB LE AT SOURCE UNDER CHAPTER XVII-B. (C)SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTIO N HAS NOT BEEN PAID ON OR BEFORE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 39. FOR THE PURPOSE OF CURRENT DISCUSSION REFERENCE TO THE PROVISO IS NOT NECESSARY. 24. WHAT THIS SUB-SECTION, THEREFORE, REQUIRES IS T HAT THERE SHOULD BE AN `AMOUNT PAYABLE IN THE NATURE DESCRIBED ABOVE, WHICH IS SUCH ON WHI CH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B BUT SUCH TAX HAS NOT BEEN DEDUCTED O R IF DEDUCTED NOT PAID BEFORE THE DUE DATE. THIS PROVISION NO-WHERE REQUIRES THAT THE AMOUNT WHICH IS PAYABLE MUST REMAIN SO PAYABLE THROUGHOUT DURING THE YEAR. TO REITERATE THE PROVISION HAS CERTAIN STRICT AND STRINGENT REQUIREMENTS BEFORE THE UNPLEASANT CONSEQ UENCES ENVISAGED THEREIN CAN BE APPLIED. WE ARE PREPARED TO AND WE ARE DUTY BOUND T O INTERPRET SUCH REQUIREMENTS STRICTLY. SUCH REQUIREMENTS, HOWEVER, CANNOT BE ENL ARGED BY ANY ADDITION OR SUBTRACTION OF WORDS NOT USED BY THE LEGISLATURE. THE TERM USED IS INTEREST, COMMISSION, BROKERAGE ETC. IS PAYABLE TO A RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR O R SUB-CONTRACTOR FOR CARRYING OUT ANY WORK. THE LANGUAGE USED IS NOT THA T SUCH AMOUNT MUST CONTINUE TO REMAIN PAYABLE TILL THE END OF THE ACCOUNTING YEAR. ANY SUCH INTERPRETATION WOULD REQUIRE READING WORDS WHICH THE LEGISLATURE HAS NOT USED. N O SUCH INTERPRETATION WOULD EVEN OTHERWISE BE JUSTIFIED BECAUSE IN OUR OPINION, THE LEGISLATURE COULD NOT HAVE INTENDED TO BRING ABOUT ANY SUCH DISTINCTION NOR THE LANGUAGE U SED IN THE SECTION BRINGS ABOUT ANY SUCH MEANING. IF THE INTERPRETATION AS ADVANCED BY THE ASSESSEES IS ACCEPTED, IT WOULD LEAD TO A SITUATION WHERE THE ASSESSEE WHO THOUGH W AS REQUIRED TO DEDUCT THE TAX AT SOURCE BUT NO SUCH DEDUCTION WAS MADE OR MORE FLAGR ANTLY DEDUCTION THOUGH MADE IS NOT PAID TO THE GOVERNMENT, WOULD ESCAPE THE CONSEQUENC E ONLY BECAUSE THE AMOUNT WAS ALREADY PAID OVER BEFORE THE END OF THE YEAR IN CON TRAST TO ANOTHER ASSESSEE WHO WOULD OTHERWISE BE IN SIMILAR SITUATION BUT IN WHOSE CASE THE AMOUNT REMAINED PAYABLE TILL THE END OF THE YEAR. WE SIMPLY DO NOT SEE ANY LOGIC WHY THE LEGISLATURE WOULD HAVE DESIRED TO BRING ABOUT SUCH IRRECONCILABLE AND DIVERSE CONSEQU ENCES. WE HASTEN TO ADD THAT THIS IS NOT THE PRIME BASIS ON WHICH WE HAVE ADOPTED THE IN TERPRETATION WHICH WE HAVE GIVEN. IF THE LANGUAGE USED BY THE PARLIAMENT CONVEYED SUCH A MEANING, WE WOULD NOT HAVE HESITATED IN ADOPTING SUCH AN INTERPRETATION. WE ON LY HIGHLIGHT THAT WE WOULD NOT READILY ACCEPT THAT THE LEGISLATURE DESIRED TO BRING ABOUT AN INCONGRUOUS AND SEEMINGLY IRRECONCILABLE CONSEQUENCES. THE DECISION OF THE SU PREME COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX, GUJARAT VS. ASHOKBHAI C HIMANBHAI (SUPRA), WOULD NOT ALTER THIS SITUATION. THE SAID DECISION, OF COURSE, RECOGNIZES THE CONCEPT OF ASCERTAINING THE PROFIT AND LOSS FROM THE BUSINESS OR PROFESSION WITH REFERENCE TO A CERTAIN PERIOD I.E. THE ACCOUNTING YEAR. IN THIS CONTEXT, LAST DATE OF SUCH ACCOUNTING PERIOD WOULD ASSUME CONSIDERABLE SIGNIFICANCE. HOWEVER, THIS DECISION N OWHERE INDICATES THAT THE EVENTS WHICH TAKE PLACE DURING THE ACCOUNTING PERIOD SHOUL D BE IGNORED AND THE ASCERTAINMENT OF FULFILLING A CERTAIN CONDITION PROVIDED UNDER TH E STATUTE MUST BE JUDGED WITH REFERENCE TO LAST DATE OF THE ACCOUNTING PERIOD. PARTICULARLY, I N THE CONTEXT OF REQUIREMENTS OF SECTION 40(A)(IA) OF THE ACT, WE SEE NO WARRANT IN THE SAID DECISION OF THE SUPREME COURT TO APPLY 12 THE TEST OF PAYABILITY ONLY AS ON 31 ST MARCH OF THE YEAR UNDER CONSIDERATION. MERELY BECAUSE, ACCOUNTS ARE CLOSED ON THAT DATE AND THE C OMPUTATION OF PROFIT AND LOSS IS TO BE JUDGED WITH REFERENCE TO SUCH DATE, DOES NOT MEAN T HAT WHETHER AN AMOUNT IS PAYABLE OR NOT MUST BE ASCERTAINED ON THE STRENGTH OF THE POSI TION EMERGING ON 31 ST MARCH. 25. THIS BRINGS US TO THE SECOND ASPECT OF THIS DIS CUSSION, NAMELY, WHETHER THIS IS A CASE OF CONSCIOUS OMISSION AND THEREFORE, THE LEGISLATUR E MUST BE SEEN TO HAVE DELIBERATELY BROUGHT ABOUT A CERTAIN SITUATION WHICH DOES NOT RE QUIRE ANY FURTHER INTERPRETATION. THIS IS THE FUNDAMENTAL ARGUMENT OF THE TRIBUNAL IN THE CAS E OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT(SUPRA) TO ADOPT A PARTICULAR VIEW. 26. WHILE INTERPRETING A STATUTORY PROVISION THE CO URTS HAVE OFTEN APPLIED HYDEN S RULE OR THE MISCHIEF RULE AND ASCERTAINED WHAT WAS THE POSI TION BEFORE THE AMENDMENT, WHAT THE AMENDMENT SOUGHT TO REMEDY AND WHAT WAS THE EFFECT OF THE CHANGES. 27. IN THE CASE OF BENGAL IMMUNITY CO. LTD. VS. STATE OF BIHAR AND OTH ERS REPORTED IN AIR 1955 SC 661 , THE APEX COURT REFERRED TO THE FAMOUS ENGLISH DEC ISION IN HYDEN S CASE WHEREIN WHILE ADOPTING RESTRICTIVE OR ENLARGIN G INTERPRETATION, IT WAS OBSERVED THAT FOUR THINGS ARE TO BE CONSIDERED, (1) WHAT WAS THE COMMON LAW BEFORE MAKING OF THE ACT (2) WHAT WAS THE MISCHIEF AND DEFECT IN WHICH THE C OMMON LAW DID NOT PROVIDE. (3) WHAT REMEDY THE PARLIAMENT HAD RESOLVED AND ADOPTED TO C URE THE DISEASE AND (4) TRUE REASON OF THE REMEDY. 28. IN SUCH CONTEXT, THE POSITION PREVAILING PRIOR TO THE AMENDMENT INTRODUCED IN SECTION 40(A) WOULD CERTAINLY BE A RELEVANT FACTOR. HOWEVER , THE PROCEEDINGS IN THE PARLIAMENT, ITS DEBATES AND EVEN THE SPEECHES MADE BY THE PROPOSER OF A BILL ARE ORDINARILY NOT CONSIDERED AS RELEVANT OR SAFE TOOLS FOR INTERPRETA TION OF A STATUTE. IN THE CASE OF ASWINI KUMAR GHOSE AND ANOTHER VS. ARABINDA BOSE AND ANOTH ER REPORTED IN A.I.R. 1952 SC 369 IN A CONSTITUTION BENCH DECISION OF (CORAM: PATANJALI SASTRI, C.J.) , OBSERVED THAT:- 33. &..IT WAS URGED THAT ACCEPTANCE OR REJECTION OF AMENDMENTS TO A BILL IN THE COURSE OF PARLIAMENTARY PROCEEDINGS F ORMS PART OF THE PRE-ENACTMENT HISTORY OF A STATUTE AND AS SUCH MIGH T THROW VALUABLE LIGHT ON THE INTENTION OF THE LEGISLATURE WHEN THE LANGUAGE USED IN THE STATUE ADMITTED OF MORE THAN ONE CONSTRUCTION. WE ARE UNABLE TO ASSENT TO THIS PREPOSITION. THE REASON WHY A PARTICULAR AMENDMENT WAS PROPOSED OR ACCEPTED OR REJECTED IS OFTEN A MATTER OF CONTROVER SY, AS IT HAPPENED TO BE IN THIS CASE, AND WITHOUT THE SPEECH ES BEARING UPON THE MOTION, IT CANNOT BE ASCERTAINED WITH ANY REASONABLE DEGREE OF CERTAINTY. AND WHERE THE LEGISLATURE HAPP ENS TO BE BICAMERAL, THE SECOND CHAMBER MAY OR MAY NOT HAVE K NOWN OF SUCH REASON WHEN IT DEALT WITH THE MEASURE. WE HOLD ACCORDINGLY THAT ALL THE THREE FORMS OF EXTRINSIC A ID SOUGHT TO BE RESORTED TO BY THE PARTIES IN THE CASE MUS BE EXCLU DED FROM CONSIDERATION IN ASCERTAINING THE TRUE OBJECT AND I NTENTION OF THE LEGISLATURE. 29. IN YET ANOTHER CONSTITUTION BENCH JUDGMENT IN T HE CASE OF A.K.GOPALAN VS. STATE OF MADRAS REPORTED IN AIR 1950 SC 27 , IT WAS OBSERVED AS UNDER:- 17.....THE RESULT APPEARS TO BE THAT WHILE IT IS N OT PROPER TO TAKE INTO CONSIDERATION THE INDIVIDUAL OPINIONS OF MEMBERS OF PARLIAMENT OR CONVENTION TO CONSTRUE THE MEANING OF THE PARTICULAR CLAUSE, WHEN A QUESTION I S RAISED WHETHER A CERTAIN PHRASE OR EXPRESSION WAS UP FOR CONSIDERATION AT ALL OR NO T, A REFERENCE TO THE DEBATES MAY BE PERMITTED. 30. IN THE CASE OF EXPRESS NEWSPAPER (PRIVATE) LTD. AND ANOTHER VS. THE UNION OF INDIA AND OTHERS REPORTED IN AIR 1958 SC 578 , N.H.BHAGWATI, J., OBSERVED AS UNDER:- 13 173. WE DO NOT PROPOSE TO ENTER INTO ANY ELABORATE DISCUSSION ON THE QUESTION WHETHER IT WOULD BE COMPETENT TO US IN ARRIVING AT A PROPER CONSTRUCTION OF THE EXPRESSION FIXING RATES OF WAGES TO LOOK INTO THE S TATEMENT OF OBJECTS AND REASONS ATTACHED TO THE BILL NO.13 OF 1955 AS INTRO DUCED IN THE RAJYA SABHA OR THE CIRCUMSTANCES UNDER WHICH THE WORD MINIMUM CAME TO BE DELETED FROM THE PROVISIONS OF THE BILL RELATING TO RATES OF WAGES A ND THE WAGE BOARD AND THE FACT OF SUCH DELETION WHEN THE ACT CAME TO BE PASSED IN ITS PRESENT FORM. THERE IS A CONSENSUS OF OPINION THAT THESE ARE NOT AIDS TO THE CONSTRUCTION OF THE TERMS OF THE STATUTE WHICH HAVE OF COURSE TO BE GIVEN THEIR PLAI N AND GRAMMATICAL MEANING ( SEE: ASHVINI KUMAR GHOSH V. ARABINDA BOSE, 1953 SC R 1:( AIR 1952 SC 369) (Z24) AND PROVAT KUMAR KAR V. WILLIAM TREVELYAN CURTIEZ PARKE R, AIR 1950 CAL 116 (Z25). IT IS ONLY WHEN THE TERMS OF THE STATUTE ARE AMBIGUOUS OR VAGUE THAT RESORT MAY BE HAD TO THEM FOR THE PURPOSE OF ARRIVING AT THE TRUE INTENT ION OF THE LEGISLATURE. 31. IT CAN THUS BE SEEN THAT THE DEBATES IN THE PARLIAMENT ARE ORDINARILY NOT CONSIDERED AS THE AIDS FOR INTERPRETATION OF THE ULTIMATE PROVISI ON WHICH MAY BE BROUGHT INTO THE STATUTE. THE DEBATES AT BEST INDICATE THE OPINION OF THE IND IVIDUAL MEMBERS AND ARE ORDINARILY NOT RELIED UPON FOR INTERPRETING THE PROVISIONS, PARTIC ULARLY WHEN THE PROVISIONS ARE PLAIN. WE ARE CONSCIOUS THAT DEPARTURE IS MADE IN TWO EXCEPTI ONAL CASES, NAMELY, THE DEBATES IN THE CONSTITUENT ASSEMBLY AND IN CASE OF FINANCE MINISTER S SPEECH EXPLAINING THE REASON FOR INTRODUCTION OF A CERTAIN PROVISION. THE REASON WHY A CERTAIN LANGUAGE WAS USED IN A DRAFT BILL AND WHY THE PROVISION ULTIMATE LY ENACTED CARRIED A DIFFERENT EXPRESSION CANNOT BE GATHERED FROM MERE COMPARISON OF THE TWO SETS OF PROVISIONS. THERE MAY BE VARIETY OF REASONS WHY THE ULTIMATE PROVISION MAY V ARY FROM THE ORIGINAL DRAFT. IN THE PARLIAMENTARY SYSTEM, TWO HOUSES SEPARATELY DEBATE THE LEGISLATIONS UNDER CONSIDERATION. IT WOULD ALL THE MORE BE UNSAFE TO R EFER TO OR RELY UPON THE DRAFTS, AMENDMENTS, DEBATES ETC FOR INTERPRETATION OF A STA TUTORY PROVISION WHEN THE LANGUAGE USED IS NOT CAPABLE OF SEVERAL MEANINGS. IN THE PRE SENT CASE THE TRIBUNAL IN CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) FELL IN A SERIOUS ERROR IN MERELY COMPARING THE LANGUAGE USED IN THE DRAFT BILL AND F INAL ENACTMENT TO ASSIGN A PARTICULAR MEANING TO THE STATUTORY PROVISION. 32. IT IS, OF COURSE, TRUE THAT THE COURTS IN INDIA HAVE BEEN APPLYING THE PRINCIPLE OF DELIBERATE OR CONSCIOUS OMISSION. SUCH PRINCIPLE IS APPLIED MAINLY WHEN AN EXISTING PROVISION IS AMENDED AND A CHANGE IS BROUGHT ABOUT. WHILE INTERPRETING SUCH AN AMENDED PROVISION, THE COURTS WOULD IMMEDIATELY INQ UIRE WHAT WAS THE STATUTORY PROVISION BEFORE AND WHAT CHANGES THE LEGISLATURE B ROUGHT ABOUT AND COMPARE THE EFFECT OF THE TWO. THE OTHER OCCASION FOR APPLYING THE PRI NCIPLE, WE NOTICE FROM VARIOUS DECISIONS OF THE SUPREME COURT, HAS BEEN WHEN THE LANGUAGE OF THE LEGISLATURE IS COMPARED WITH SOME OTHER ANALOGOUS STATUTE OR OTHER PROVISIONS OF THE SAME STATUTE OR WITH EXPRESSION WHICH COULD APPARENTLY OR OBVIOUSLY BEEN USED IF TH E LEGISLATURE HAD DIFFERENT INTENTION IN MIND, WHILE FRAMING THE PROVISION. WE MAY REFER TO SOME OF SUCH DECISIONS PRESENTLY. IN THE CASE OF BHUWALKA STEEL INDUSTRIES LTD. VS. BOMBAY IRON AND STEEL LABOUR BOARD REPORTED IN AIR 2010 (SUPPL.) 122 , THE APEX COURT OBSERVED AS UNDER:- THE OMISSION OF THE WORDS AS PROPOSED EARLIER FROM THE FINAL DEFINITION IS A DELIBERATE AND CONSCIOUS ACT ON THE PART OF THE LEG ISLATURE, ONLY WITH THE OBJECTIVE TO PROVIDE PROTECTION TO ALL THE LABOURER S OR WORKERS, WHO WERE THE MANUAL WORKERS AND WERE ENGAGED OR TO BE ENGAGED IN ANY SCHEDULED EMPLOYMENT. THEREFORE, THERE WAS A SPECIFIC ACT ON THE PART OF THE LEGISLATURE TO ENLARGE THE SCOPE OF THE DEFINITION AND ONCE WE ACCEPT THIS, ALL THE ARGUMENTS REGARDING THE OBJECTS AND REASONS, THE CO MMITTEE REPORTS, THE LEGISLATIVE HISTORY BEING CONTRARY TO THE EXPRESS L ANGUAGE, ARE RELEGATED TO THE BACKGROUND AN D ARE LIABLE TO BE IGNORED. 33. IN THE CASE OF AGRICULTURAL PRODUCE MARKET COMMITTEE, NARELA, DELH I VS. COMMISSIONER OF INCOME TAX AND ANR. REPORTED IN AIR 2008 SC(SUPPLEMENT) 566 , THE SUPREME COURT NOTICED THAT PRIOR TO FINANCE ACT , 2002, THE INCOME TAX ACT DID NOT CONTAIN THE DEFINITION OF WORDS LOCAL AUTHORITY . TH E WORD CAME TO BE DEFINED FOR THE FIRST TIME BY THE FINANCE ACT OF 2002 BY EXPLANATIO N/ DEFINITION CLAUSE TO SECTION 10(20) OF THE ACT. IT WAS FURTHER NOTICED THAT THERE WERE SIG NIFICANT DIFFERENCE IN THE DEFINITION OF TERM LOCAL AUTHORITY CONTAINED UNDER SECTION 3(31) OF THE GENERAL CLAUSES ACT, 1987 AS COMPARED TO THE DEFINITION CLAUSE INSERTED IN SE CTION 10(20) OF THE INCOME TAX ACT, 1961 VIDE FINANCE ACT, OF 2002. IN THIS CONTEXT IT WAS OBSERVED THAT:- 14 27. CERTAIN GLARING FEATURES CAN BE DECIPHERED FROM THE ABOVE COMPARATIVE CHART. UNDER SECTION 3(31) OF THE GENER AL CLAUSES ACT, 1897, LOCAL AUTHORITY WAS DEFINED TO MEAN A MUNICI PAL COMMITTEE, DISTRICT BOARD, BODY OF PORT COMMISSIONE RS OR OTHER AUTHORITY LEGALLY ENTITLED TO THE CONTROL OR MANAGE MENT OF A MUNICIPAL OR LOCAL FUND. THE WORDS OTHER AUTHORITY IN SECTIO N 3(31) OF THE 1897 ACT HAS BEEN OMITTED BY PARLIAMENT IN THE EXPL ANATION/ DEFINITION CLAUSE INSERTED IN SECTION 10(20) OF THE 1961 ACT VIDE FINANCE ACT, 2002. THEREFORE, IN OUR VIEW, IT WOULD NOT BE CORRECT TO SAY THAT THE ENTIRE DEFINITION OF THE WORD LOCAL AU THORITY IS BODILY LIFTED FROM SECTION 3(31) OF THE 1897 ACT AND INCOR PORATED, BY PARLIAMENT, IN THE SAID EXPLANATION TO SECTION 10(2 0) OF THE 1961 ACT. THIS DELIBERATE OMISSION IS IMPORTANT. 34. THE APEX COURT IN THE CASE OF GREATER BOMBAY CO-OPERATIVE BANK LTD. VS. M/S. UNITED YARN TEX.PVT.LTD & ORS. REPORTED IN AIR 2007 SC 1584 , IN THE CONTEXT OF QUESTION WHETHER THE COOPERATIVE BANKS TRANSACTING BUSINESS OF BANKING FALL WITHIN THE MEANING OF BANKING COMPANY DEFINED IN THE BANKING R EGULATION ACT, 1949, OBSERVED AS UNDER:- 59. THE RDB ACT WAS PASSED IN 1993 WHEN PARLIAMENT HAD BEFORE IT THE PROVISIONS OF THE BR ACT AS AMENDED BY ACT NO.23 OF 1965 BY ADDITION OF SOME MORE CLAUSES IN SECTION 56 OF THE ACT. THE PAR LIAMENT WAS FULLY AWARE THAT THE PROVISIONS OF THE BR ACT APPLY TO CO-OPERA TIVE SOCIETIES AS THEY APPLY TO BANKING COMPANIES. THE PARLIAMENT WAS ALSO AWARE THAT THE DEFINITION OF BANKING COMPANY IN SECTION 5(C) HAD NOT BEEN ALTERE D BY ACT NO.23 OF 1965 AND IT WAS KEPT INTACT, AND IN FACT ADDITIONAL DEFINITIONS WERE ADDED BY SECTION 56(C). CO- OPERATIVE BANK WAS SEPARATELY DEFINED BY THE NEWLY INSERTED CLAUS E (CCI) AND PRIMARY CO- OPERATIVE BANK WAS SIMILARLY SEPARATELY DEFINED BY CLAUSE (CCV). THE PARLIAMENT WAS SIMPLY ASSIGNING A MEANING TO WORDS; IT WAS NOT INCORPORATING OR EVEN REFERRING TO THE SUBSTANTIVE PROVISIONS OF THE BR ACT. THE MEANING OF BANKIN G COMPANY MUST, THEREFORE, NECESSARILY BE STRICTLY CONFINED T O THE WORDS USED IN SECTION 5(C) OF THE BR ACT. IT WOULD HAVE BEEN THE EASIEST THING FOR PARLIAMENT TO SAY THAT BANKING COMPANY SHALL MEAN B ANKING COMPANY AS DEFINED IN SECTION 5(C) AND SHAL L INCLUDE CO-OPERATIVE BANK AS DEFINED IN SECTION 5(CCI) AND PRIMARY CO- OPERATIVE BANK AS DEFINED IN SECTION 5(CCV). HOWEVER, THE PARLIAMENT DID NOT DO SO. THERE WAS THUS A CONSCIOUS EXCLUSION AND DELIBERATE COMMI SSION OF CO- OPERATIVE BANKS FROM THE PURVIEW OF THE RDB ACT. THE REASON FOR EXCLUDING CO-OPERATIVE BANKS SEEMS TO BE THAT CO-OP ERATIVE BANKS HAVE COMPREHENSIVE, SELF-CONTAINED AND LESS EXPENSIVE RE MEDIES AVAILABLE TO THEM UNDER THE STATE CO-OPERATIVE SOCIETIES ACTS OF THE STATES CONCERNED, WHILE OTHER BANKS AND FINANCIAL INSTITUTIONS DID NO T HAVE SUCH SPEEDY REMEDIES AND THEY HAD TO FILE SUITS IN CIVIL COURTS . 35. IN THE CASE OF NATIONAL MINERAL DEVELOPMENT CORPORATION LTD. VS. S TATE OF M.P AND ANOTHER REPORTED IN AIR 2004 SC 2456 , THE APEX COURT OBSERVED AS UNDER:- 29. THE PARLIAMENT KNOWING IT FULL WELL THAT THE I RON ORE SHALL HAVE TO UNDERGO A PROCESS LEADING TO EMERGENCE OF LUMPS, FINES, CON CENTRATES AND SLIMES CHOSE TO MAKE PROVISION FOR QUANTIFICATION OF ROYAL TY ONLY BY REFERENCE TO THE QUANTITY OF LUMPS, FINES AND CONCENTRATES. IT LEFT SLIMES OUT OF CONSIDERATION. NOTHING PREVENTED THE PARLIAMENT FROM EITHER PROVID ING FOR THE QUANTITY OF IRON ORE AS SUCH AS THE BASIS FOR QUANTIFICATION OF ROYALTY. IT CHOSE TO MAKE PROVISION FOR THE QUANTIFICATION BEING AWAITED UNTI L THE EMERGENCE OF LUMPS, FINES AND CONCENTRATES. HAVING DONE SO THE PARLIAMENT HAS NOT SAID FINES INCLUDING SLIMES . THOUGH SLIMES ARE NOT FINES THE PARLIAMENT COULD HAVE ASSIGNED AN ARTIFICIAL OR EXT ENDED MEANING TO FINE S FOR THE PURPOSE OF LEVY OF ROYALTY WHICH IT HAS C HOSEN NOT TO DO. IT IS CLEARLY SUGGESTIVE OF ITS INTENTION NOT T O TAKE INTO CONSIDERATION SLIMES FOR QUANTIFYING THE AMOUNT OF ROYALTY. THIS DELIBERATE OMISSION OF PARLIAMENT CANNOT BE MADE GOOD BY INTER PRETATIVE PROCESS SO AS TO CHARGE ROYALTY ON SLIMES BY READING SECTIO N 9 OF THE ACT DIVORCED FROM THE PROVISIONS OF THE SECOND SCHEDULE . EVEN IF SLIMES WERE TO BE HELD LIABLE TO CHARGE OF ROYALTY, THE QU ESTION WOULD STILL HAVE REMAINED AT WHAT RATE AND ON WHAT QUANTITY WHICH QU ESTIONS CANNOT BE ANSWERED BY SECTION 9. 15 36. IN THE CASE OF GOPAL SARDAR, VS. KARUNA SARDAR REPORTED IN AIR 2004 SC 3068 , THE APEX COURT IN THE THE CONTEXT OF LIMITATION WITHIN WHICH RIGHT OF PREEMPTION MUST BE EXERCISED AND WHETHER IN THE CONTEXT OF THE RELEVAN T PROVISIONS CONTAINED IN WEST BENGAL LAND REFORMS AND LIMITATION ACT, 1963 APPLIED OR NO T, OBSERVED AS UNDER:- 8....PRIOR TO 15-2-1971, AN APPLICATION UNDER SECTI ON 8 WAS REQUIRED TO BE MADE TO THE REVENUE OFFICER SPECIFICALLY EMPOWERED BY THE STATE GOVERNMENT IN THIS BEHALF. THIS PHRASE WAS SUBSTITU TED BY THE PHRASE MUNSIF HAVING TERRITORIAL JURISDICTION BY THE AFORE MENTIONED AMENDMENT. EVEN AFTER THIS AMENDMENT WHEN AN APPLICATION IS RE QUIRED TO BE MADE TO SECTION 8 OF THE ACT EITHER TO APPLY SECTION 5 OF T HE LIMITATION ACT OR ITS PRINCIPLES SO AS TO ENABLE A PARTY TO MAKE AN APPLI CATION AFTER THE EXPIRY OF THE PERIOD OF LIMITATION PRESCRIBED ON SHOWING SUFF ICIENT CAUSE FOR NOT MAKING AN APPLICATION WITHIN TIME. THE ACT IS OF 1955 AND FOR ALL THESE YEARS, NO PROVISION IS MADE UNDER SECTION 8 OF THE ACT PROVID ING FOR CONDONATION OF DELAY. THUS, WHEN SECTION 5 OF THE LIMITATION AC T IS NOT MADE APPLICABLE TO THE PROCEEDINGS UNDER SECTION 8 OF TH E ACT UNLIKE TO THE OTHER PROCEEDINGS UNDER THE ACT, AS ALREADY STATED ABOVE, IT IS APPROPRIATE TO CONSTRUE THAT THE PERIOD OF LIMITATI ON PRESCRIBED UNDER SECTION 8 OF THE ACT SPECIFICALLY AND EXPRESSLY GOV ERNS AN APPLICATION TO BE MADE UNDER THE SAID SECTION AND NOT THE PERIO D PRESCRIBED UNDER ARTICLE 137 OF THE LIMITATION ACT . 37. IN OUR OPINION, THE TRIBUNAL COMMITTED AN ERROR IN APPLYING THE PRINCIPLE OF CONSCIOUS OMISSION IN THE PRESENT CASE. FIRSTLY, AS ALREADY OBSERVED, WE HAVE SERIOUS DOUBT WHETHER SUCH PRINCIPLE CAN BE APPLIED BY COMPARING THE DRAFT PRESENTED IN PARLIAMENT AND ULTIMATE LEGISLATION WH ICH MAY BE PASSED. SECONDLY, THE STATUTORY PROVISION IS AMPLY CLEAR. 38. IN THE RESULT, WE ARE OF THE OPINION THAT SECTI ON 40(A)(IA) WOULD COVER NOT ONLY TO THE AMOUNTS WHICH ARE PAYABLE AS ON 31 TH MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. OF COURSE, AS LONG AS THE OTHER REQUIREMENTS OF THE SAID PROVISION EXIST. IN THAT CONTEXT, IN OU R OPINION THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SURPA), DOES NOT LAY DOWN CORRECT LAW. 39. WE ANSWER THE QUESTIONS AS UNDER:- QUESTION (1) IN THE NEGATIVE I.E. IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEES. QUESTION (2) ALSO IN THE NEGATIVE I.E. IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEES. THUS IT IS CLEAR THAT HON'BLE GUJARAT HIGH COURT HA S CONSIDERED ALL ASPECTS OF THE ISSUES RAISED IN THE DECISION OF SPE CIAL BENCH IN CASE OF MERILYN SHIPPING TRANSPORTERS V. ACIT (SUPR A). WE FURTHER FIND THAT THAT EVEN HON'BLE CALCUTTA HIGH COURT HAS OVERRULED THIS DECISION IN CASE OF CIT VS. CRESENT EXPORT SYNDICAT E. MOREOVER CHANDIGARH BENCH OF THE TRIBUNAL CONSISTENTLY HAS BEEN FOLLOWING THE DECISION OF HON'BLE GUJARAT HIGH COURT IN CASE OF CIT V. SIKANDARKHAN N TUNWAR AND OTHERS (SUPRA) AS WELL AS THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN CASE OF CIT VS. C RESENT EXPORT SYNDICATE (SUPRA). 25 NOW THE QUESTION ARISES WHETHER DISMISSAL OF SLP BY HON'BLE SUPREME COURT IN CASE OF CIT V. VECTOR SHI PPING SERVICES (P) LTD (SUPRA) WOULD CHANGE THE ABOVE LEG AL POSITION. WE ARE AFRAID THE ANSWER IS NO. THE HON'BLE SUPR EME COURT HAD ITSELF CONSIDERED THE ISSUE IN CASE OF V.M. SAL GAOCAR AND 16 BROS. PVT LTD V. CIT, 243 ITR 383. IT WAS OBSERVED BY THE COURT ON THIS ISSUE AS UNDER: DIFFERENT CONSIDERATIONS APPLY WHEN A SPECIAL LEAV E PETITION UNDER ARTICLE 136 OF THE CONSTITUTION IS SIMPLY DISMISSED BY SAYING DISMISSED, AND AN APPEAL PROVIDED UNDER ARTICLE 13 3 IS DISMISSED ALSO WITH THE WORDS THE APPEAL IS DISMISSED. IN THE FO RMER CASE IT HAS BEEN LAID DOWN BY THIS COURT THAT WHEN A SPECIAL LEAVE P ETITION IS DISMISSED THIS COURT DOES NOT COMMENT ON THE CORRECTNESS OR O THERWISE OF THE ORDER FROM WHICH LEAVE TO APPEAL IS SOUGHT. BUT WHAT THE COURT MEANS IS THAT IT DOES NOT CONSIDER IT TO BE A FIT CASE FOR EXERCISE OF ITS JURISDICTION UNDER ARTICLE 136 OF THE CONSTITUTION. THAT CERTAINLY COU LD NOT BE SO WHEN AN APPEAL IS DISMISSED THOUGH BY A NON-SPEAKING ORDER. HERE THE DOCTRINE OF MERGER APPLIES. IN THAT CASE, THE SUPREME COURT UPHOLDS THE DECISION OF THE HIGH COURT OR THE TRIBUNAL FROM WHICH THE AP PEAL IS PROVIDED UNDER CLAUSE (3) OF ARTICLE 133. THIS DOCTRINE OF MERGER DOES NOT APPLY IN THE CASE OF DISMISSAL OF A SPECIAL LEAVE PETITION UNDER ARTICLE 136. WHEN AN APPEAL IS DISMISSED THE ORDER OF THE HIGH COURT IS MERGED WITH THAT OF THE SUPREME COURT. WE QUOTE THE FOLLOWING PARAGRAPH FROM THE JUDGMENT OF THIS COURT IN THE CASE OF SUPREME COURT EMPLOYEE S WELFARE ASSOCIATION V. UNION OF INDIA, AIR 1990 HON'BLE SUP REME COURT 334; [1989] 4 SCC 187 (AT PAGE 344 OF AIR 1990 S.C): 22. IT HAS BEEN ALREADY NOTICE THAT THE SPECIAL LE AVE PETITION FILED ON BEHALF OF THE UNION OF INDIA AGAINST THE SAID JUDGM ENTS OF THE DELHI HIGH COURT WERE SUMMARILY DISMISSED BY THIS COURT. IT IS NOW A WELL SETTLED PRINCIPLE OF LAW THAT WHEN A SPECIAL LEAVE PETITION IS SUMMARILY DISMISSED UNDER ARTICLE 136 OF THE CONSTITUTION, BY SUCH DISM ISSAL THIS COURT DOES NOT LAY DOWN ANY LAW, AS ENVISAGED BY ARTICLE 141 O F THE CONSTITUTION, AS CONTENDED BY THE LEARNED ATTORNEY-GENERAL. IN INDIA N OIL CORPORATION LTD. V. STATE OF BIHAR [1987] 167 ITR 897; [1986] 4 SCC 146; AIR 1986 HON'BLE SUPREME COURT 1780, IT HAS BEEN HELD BY THI S COURT THAT THE DISMISSAL OF A SPECIAL LEAVE PETITION IN LIMINE BY A NON-SPEAKING ORDER DOES NOT JUSTIFY ANY INFERENCE THAT, BY NECESSARY I MPLICATION, THE CONTENTIONS RAISED IN THE SPECIAL LEAVE PETITION ON THE MERITS OF THE CASE HAVE BEEN REJECTED BY THE SUPREME COURT. IT HAS BEE N FURTHER HELD THAT THE EFFECT OF A NON-SPEAKING ORDER OF DISMISSAL OF A SPECIAL LEAVE PETITION WITHOUT ANYTHING MORE INDICATING THE GROUNDS OR REA SONS OF ITS DISMISSAL MUST, BY NECESSARY IMPLICATION, BE TAKEN TO BE THAT THE SUPREME COURT HAD DECIDED ONLY THAT IT WAS NOT A FIT CASE WHERE S PECIAL LEAVE SHOULD BE GRANTED. IN UNION OF INDIA V. ALL INDIA SERVICES PE NSIONERS ASSOCIATION [1988] 2 SCC 580; AIR 1988 HON'BLE SUPREME COURT 50 1, THIS COURT HAS GIVEN REASONS FOR DISMISSING THE SPECIAL LEAVE PETI TION. WHEN SUCH REASONS ARE GIVEN, THE DECISION BECOMES ONE WHICH A TTRACTS ARTICLE 141 OF THE CONSTITUTION WHICH PROVIDES THAT THE LAW DEC LARED BY THE SUPREME COURT SHALL BE BINDING ON ALL THE COURTS WITHIN THE TERRITORY OF INDIA. IT, THEREFORE, FOLLOWS THAT WHEN NO REASON IS GIVEN, BU T A SPECIAL LEAVE PETITION IS DISMISSED SIMPLICITER, IT CANNOT BE SAI D THAT THERE HAS BEEN A DECLARATION OF LAW BY THIS COURT UNDER ARTICLE 141 OF THE CONSTITUTION. IT WAS, THEREFORE, CONTENDED THAT ONCE THIS COURT I N CIVIL APPEAL NO. 424 OF 1999, HAS DISMISSED THE APPEAL IT HAS UPHELD THE ORDER OF THE HIGH COURT IN THE CASE OF THE ASSESSMENT YEAR 1980-81 AN D IT CANNOT TAKE A DIFFERENT VIEW FOR THE ASSESSMENT YEAR 1979-80. THE RE APPEARS TO BE SUBSTANCE IN THE SUBMISSION OF THE ASSESSEE. FROM ABOVE IT BECOMES CLEAR THAT AFTER AN SLP IS DI SMISSED IN LIMINE OR SIMPLICTOR AS SUCH THEN IT CANNOT BE SAID THAT THE HON'BLE SUPREME COURT HAS COMMENTED ON THE MERITS O F THE ISSUE. IT IS A SIMPLE CASE OF REJECTION OF PRAYER FOR ENTERTAINING 17 THE SLP. THE SAME VIEW WAS TAKEN BY THE HON'BLE SU PREME COURT AGAIN IN CASE OF KUNHAYAMMED AND OTHERS V ST ATE OF KERALA AND ANOTHER, 245 ITR 360 (S.C). HEAD NOTE R EADS AS UNDER: ARTICLE 136 OF THE CONSTITUTION OF INDIA CONFERS A SPECIAL JURISDICTION ON THE SUPREME COURT WHICH IS SWEEPING IN NATURE. IT I S A RESIDUARY POWER IN THE SENSE THAT IT CONFERS AN APPELLATE JURISDICT ION ON THE SUPREME COURT SUBJECT TO SPECIAL LEAVE BEING GRANTED IN SUC H MATTERS AS MAY NOT BE COVERED BY THE PRECEDING ARTICLES. EVEN IN THE F IELD COVERED BY THE PRECEDING ARTICLES, JURISDICTION CONFERRED BY ARTIC LE 136 IS AVAILABLE TO BE EXERCISED IN AN APPROPRIATE CASE. IT IS AN UNTRAMME LED RESERVOIR OF POWER INCAPABLE OF BEING CONFINED TO DEFINITIONAL B OUNDS; THE DISCRETION CONFERRED ON THE SUPREME COURT BEING SUBJECTED TO O NLY ONE LIMITATION, THAT IS, THE WISDOM AND GOOD SENSE OR SENSE OF JUST ICE OF THE JUDGES. NO RIGHT OF APPEAL IS CONFERRED UPON ANY PARTY; ONLY A DISCRETION IS VESTED IN THE SUPREME COURT TO INTERFERE BY GRANTING LEAVE TO AN APPLICANT TO ENTER IN ITS APPELLATE JURISDICTION NOT OPEN OTHERWISE AN D AS OF RIGHT. THE JURISDICTION CONFERRED BY ARTICLE 136 IS DIVISI BLE INTO TWO STAGES; THE FIRST STAGE IS UP TO THE DISPOSAL OF THE PRAYER FOR SPECIAL LEAVE TO APPEAL; THE SECOND STAGE COMMENCES IF AND WHEN THE LEAVE TO APPEAL IS GRANTED AND THE PETITION FOR SPECIAL LEAVE TO APPEAL IS CON VERTED INTO AN APPEAL. WHILE HEARING THE PETITION FOR SPECIAL LEAVE TO APP EAL, THE SUPREME COURT IS CALLED UPON TO SEE WHETHER THE PETITIONER SHOULD BE GRANTED SUCH LEAVE OR NOT. WHILE HEARING SUCH PETITION THE SUPRE ME COURT DOES NOT EXERCISE ITS APPELLATE JURISDICTION; IT MERELY EXER CISES ITS DISCRETIONARY JURISDICTION TO GRANT OR NOT TO GRANT LEAVE TO APPE AL IF THE PETITION SEEKING GRANT OF SPECIAL LEAVE IS D ISMISSED, IT IS AN EXPRESSION OF OPINION BY THE SUPREME COURT THAT A C ASE FOR INVOKING THE APPELLATE JURISDICTION OF THE COURT WAS NOT MADE OU T. AN ORDER REFUSING SPECIAL LEAVE TO APPEAL MAY BE BY A NON SPEAKING ORDER OR BY A SPEAKING ORDER. IN EITHER CASE IT DOE S NOT ATTRACT THE DOCTRINE OF MERGER. AN ORDER REFUSING SPECIAL LEAVE TO APPEAL DOES NOT STAND SUBSTITUTED IN THE PLACE OF THE ORDER UNDER C HALLENGE. ALL THAT IT MEANS IS THAT THE SUPREME COURT WAS NOT INCLINED TO EXERCISE ITS DISCRETION SO AS TO ALLOW THE APPEAL BEING FILED. W HATEVER BE THE PHRASEOLOGY EMPLOYED IN THE ORDER OF DISMISSAL, IF IT IS A NON-SPEAKING ORDER, I.E., IT DOES NOT ASSIGN REASONS FOR DISMISS ING THE SPECIAL LEAVE PETITION, IT WOULD NEITHER ATTRACT THE DOCTRINE OF MERGER SO AS TO STAND SUBSTITUTED IN THE PLACE OF THE ORDER PUT IN ISSUE BEFORE IT, NOR BE A DECLARATION OF LAW BY THE SUPREME COURT UNDER ARTIC LE 141 OF THE CONSTITUTION FOR THERE IS NO LAW WHICH HAS BEEN DEC LARED. IF THE ORDER REFUSING SPECIAL LEAVE TO APPEAL IS A SPEAKING ORDER, I.E., IT GIVES REASONS FOR REFUSING THE GRANT OF LEAVE, THEN THE ORDER HAS TWO IMPLICATIONS. FIRSTLY, THE STATEMENT OF LAW CONTAIN ED IN THE ORDER IS A DECLARATION OF LAW BY THE SUPREME COURT WITHIN THE MEANING OF ARTICLE 141 WHICH WILL OBVIOUSLY BE BINDING ON ALL COURTS A ND TRIBUNALS IN INDIA AND CERTAINLY THE PARTIES THERETO. SECONDLY, OTHER THAN THE DECLARATION OF LAW, WHATEVER IS STATED IN THE ORDER ARE THE FINDIN GS RECORDED BY THE SUPREME COURT WHICH WOULD BE BINDING ON THE PARTIES AND THE COURT, TRIBUNAL OR AUTHORITY WHOSE ORDER WAS UNDER CHALLEN GE, IN ANY PROCEEDINGS SUBSEQUENT THERETO, ON THE PRINCIPLE OF JUDICIAL DISCIPLINE, THE SUPREME COURT BEING THE APEX COURT OF THE COUNT RY. THE DECLARATION OF LAW WILL BE GOVERNED BY ARTICLE 141 BUT, THE CAS E NOT BEING ONE WHERE LEAVE IS GRANTED, THE DOCTRINE OF MERGER DOS NOT AP PLY. 18 FROM ABOVE IT BECOMES CLEAR THAT IF AN SLP IS DISMI SSED THEN IT CANNOT BE SAID THAT THE HON'BLE SUPREME COURT HAS LAID DOWN ANY LAW. NOW IN THE PRESENT CASE THE SLP IN CASE O F CIT V VECTOR SHIPPING SERVICES (SUPRA) FOLLOWING ORDER HA S BEEN PASSED BY THE HON'BLE SUPREME COURT : HEARD MR. MUKUL ROHTAGI, LD. ATTORNEY GENERAL, FOR THE PETITIONER DELAY IN FILING AND REFILLING SPECIAL LEAVE PETITIO N IS CONDONED SPECIAL LEAVE PETITION IS DISMISSED THEREFORE IT IS A CASE OF SIMPLE DISMISSAL OF SLP A ND CANNOT BE SAID TO HAVE LAID DOWN ANY LAW. IN VIEW OF THIS DIS CUSSION AND THE EARLIER DISCUSSION WE HAVE PREFERRED TO FOLLOW THE DECISION OF HON'BLE GUJARAT HIGH COURT IN CASE OF CIT V. SIK ANDARKHAN N. TUNVAR & ORS, (SUPRA) INSTEAD THE DECISION OF HO N'BLE ALLAHABAD HIGH COURT IN CASE OF CIT V VECTOR SHIPPI NG SERVICES (SUPRA), WE DECIDE THIS ISSUE AGAINST THE ASSESSEE AND CONFIRM THE ORDER OF LD. CIT(A). 26 GROUND NO. 2 - AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ASSESSING OFFICER HAD DISALLOWED EXCESSIVE EXPE NSES ON REPAIR AND MAINTENANCE BY RESTRICTING THE DISALLOWA NCE OF REPAIR AND MAINTENANCE TO 1% OF THE VALUE OF THE BU ILDING AS DIRECTED BY THE TRIBUNAL IN SOME EARLIER YEAR. IN THIS BACKGROUND HE ALLOWED 1% VALUE OF THE BUILDING I.E. RS. 1695,000/- AND SINCE THE CLAIM FOR REPAIR WAS RS. 2 084417/- THE BALANCE OF RS. 389417/- WAS DISALLOWED. HOWEVER , DEPRECIATION @ 10% WAS ALLOWED AND NET DISALLOWANCE MADE WAS RS. 350475/-. 27 ON APPEAL ACTION OF THE ASSESSING OFFICER WAS CO NFIRMED BY THE LD. CIT(A) VIDE PARA 28 WHICH IS AS UNDER: I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS A ND MATERIAL ON RECORD. I FIND THAT THE ISSUE HAS ALREADY BEEN DECIDED BY H ONBLE ITAT, 19 CHANDIGARH VIDE ITS ORDER IN ITA NO. 295/CHANDI/200 7 FOR THE A.Y. 2004- 05 IN THE ASSESSEES OWN CASE. THE RELEVANT EXTRACT OF THE ORDER OF HONBLE ITAT IS REPRODUCED AS UNDER: FROM THE DETAILS OF EXPENDITURE REFERRED TO ABOVE ONE CANNOT SAY WITH CERTAIN AMOUNT OF CERTAINTY THAT THE EXPENDITURE IN CURRED BY THE ASSESSEE IS SOLELY ON CURRENT REPAIRS OF THE BUILDINGS. IT A PPEARS THAT PART OF THE EXPENDITURE HAS BEEN INCURRED FOR CURRENT REPAIRS A ND PART FOR RENOVATION OF THE BUILDING. SINCE NO DETAILS ARE AVAILABLE ON RECORD AND NO ATTEMPT HAS BEEN MADE EITHER BY THE ASSESSEE OR BY THE REVE NUE TO IDENTIFY THE EXPENDITURE ATTRIBUTABLE TO CURRENT REPAIRS AND REN OVATION SEPARATELY, WE HAVE NO OPTION BUT TO ESTIMATE THE EXPENDITURE ATTR IBUTABLE TO CURRENT REPAIRS OF THE BUILDING. IT IS OBSERVED FROM THE DE TAILS OF FIXED ASSET AVAILABLE ON RECORD THAT VALUE OF THE BUILDING AT T HE BEGINNING OF THE YEAR WAS RS. 43385041/-. IN OUR VIEW, IT WOULD BE REASON ABLE TO ALLOW 1% OF THE COST OF THE BUILDING AS CURRENT REPAIRS AND RES T OF THE AMOUNT IS TREATED AS AN EXPENDITURE INCURRED FOR RENOVATION O F THE BUILDING. 28 BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT 1% ALLOWANCE ON ACCOUNT OF REPAIR WAS HELD TO BE REASONABLE BY THE TRIBUNAL IN ASSESSMENT YEAR 2004 -05 BUT OVER A PERIOD OF TIME THE BUILDING WOULD GET OLDER AND MAY REQUIRE MORE REPAIR AND THEREFORE CRITERIA OF 1% CA NNOT BE FOLLOWED FOR LATTER YEARS. 29 ON THE OTHER HAND, THE LD. D.R. FOR THE REVENUE SUPPORTED THE ORDER OF THE LD. CIT(A). 30 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE N OT SURE UNDER WHAT CIRCUMSTANCES 1% REPAIR AND MAINTENANCE EXPENSES WAS HELD TO BE REASONABLE BY THE TRIBUNAL. NORMALLY ALLOWANCE ON ACCOUNT OF REPAIR AND MAINTENANCE IS T O BE EXAMINED WITH REFERENCE TO EACH ITEM AND THE ITEMS WHICH ARE NOT CAPITAL IN NATURE HAVE TO BE ALLOWED. HOWEVER, NO DETAIL IS AVAILABLE IN THE ASSESSMENT ORDER WITH REFERENCE TO REPAIR AND MAINTENANCE. THERE IS SOME FORCE IN THE SUBMISSION S OF THE LD. COUNSEL FOR THE ASSESSEE THAT 1% CRITERIA CANNO T BE FOLLOWED IN THE LATTER YEAR, THEREFORE IN THE INTER EST OF THE JUSTICE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) A ND RESTRICT HE DISALLOWANCE OF REPAIR AND MAINTENANCE AT RS. 1,50, 000/ WE 20 HAVE ALREADY OBSERVED THAT SINCE THE DETAILS ARE NO T AVAILABLE AND THIS IS A SMALL MATTER AND THEREFORE THERE IS N O PURPOSE FOR REMITTING THE SAME TO THE FILE OF ASSESSING OFFICER AND WE HAVE PREFERRED TO MAKE REASONABLE DISALLOWANCE. 31 IN THE RESULT, CROSS OBJECTIONS OF THE ASSESSEE ARE PARTLY ALLOWED. 32 IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D AND THE CROSS OBJECTIONS OF THE ASSESSEE ARE PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 8.8.2014 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 8.8.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR