Asst. Commissioner of Income Tax, Circle-1(1), Panaji V. M/s Orchid Biomedical Systems, Goa

ITA 122/PAN/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88716 (ITAT-PANAJI)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 08-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VINAY SINGH RAWAT LD
• Assessee Lawyers: MANJUNATH HEGDE
• Keywords: Question of law
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA N O . 121 & 309 /PNJ/201 4 : (A.Y - 2009 - 10 & 2010 - 11 ) ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), PANAJI, GOA ( APPELLANT) VS. M/S. ZEPHYR BIOMEDICALS PLOT NO. 13, SAGAR SOCIETY, DONA PAULA, PANAJI, GOA. PAN : AAAFZ1800B (RESPONDENT) ITA N O . 122 /PNJ/201 4 : (A.Y - 2009 - 10 ) ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), PANAJI, GOA ( APPELLANT) VS. M/S. ORCHID BIOMEDICAL SYSTEMS, GROUND FLOOR, GEETANJALI BLDG., DR. REGO BAGH ALTO, SANTACRUZ, BAMBOLIM, GOA. PAN : AAAF O4304K (RESPONDENT) ASSESSEE BY : TATA KRISHNA, ADV, LORENCE J. MALEKAR, CA & MANJUNATH HEGDE, CA REVENUE BY : VINAY SINGH RAWAT, LD. DR DATE OF HEARING : 08 / 01 /201 5 DATE OF ORDER : 16 / 01 /201 5 O R D E R PER BENCH : 1. THE ABOVE APPEALS HAVE ARISEN OUT OF THE ORDERS OF CIT(A) DT. 16.12.2013 & 30.6.2014 IN THE CASE OF M/S. ZEPHYR BIOMEDICALS FOR A.YS 2009 - 10 & 2010 - 11 RESPECTIVELY AND ORDER DT. 16.12.2013 IN THE CASE OF M/S. ORCHID BIOMEDICAL SYSTEMS FOR A.Y 2009 - 10. THE ISSUE INVOLVED IN ALL THESE APPEALS ARE COMMON AND BOTH THE PARTIES AGREED THAT ALL THESE APPEALS BE DISPOSED OFF ON THE BASIS OF THE FACTS RELATING TO ITA NO. 121/PNJ/2014. 2 ITA NO. 121&309/PNJ/2014 (A.YS : 2009 - 10 & 2010 - 11) ITA NO. 122/PNJ/2014 (A.Y : 2009 - 10) 2. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS IN ITA NO. 121/PNJ/2014 : 2. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIONS OF RS.73,21,304/ - MADE U/S 40(A)(IA) R.W.S SEC. 194C TOWARDS PAYMENT OF DEMURRAGES TO PARTIES IN INDIA, WHERE IN FACT PAYMENTS WERE MADE TO AGENTS FOR CONTRACT WORK ON WHICH TDS WAS NOT DEDUCTED. IN ITA NOS. 122/PNJ/20 14 AND 309/PNJ/2014 ALSO THE GROUNDS ARE COMMON EXCEPT FOR CHANGE IN THE FIGURE. IN PLACE OF RS.73,21,304/ - IN ITA NO. 121/PNJ/2014, AMOUNT OF RS.3,00,14,341/ - AND RS. 72,97,022/ - BE RESPECTIVELY READ IN ITA NOS. 122/PNJ/2014 AND 309/PNJ/2014. 3. ARGUMEN TS WERE ADVANCED BY BOTH THE PARTIES ON THE BASIS OF THE FACTS IN ITA NO. 121/PNJ/2014. WE, THEREFORE, DECIDED TO DISPOSE OFF ALL THE APPEALS ON THE BASIS OF FACTS IN ITA NO. 121/PNJ/2014. 4. THE ONLY ISSUE INVOLVED IN ALL THESE APPEALS RELATE TO WHETH ER CIT(A) WAS CORRECT IN LAW IN DELETING THE DISALLOWANCE MADE BY THE AO BY APPLYING THE PROVISIONS OF SEC. 40(A)(IA). THE FACTS FOR THE A.Y 2009 - 10 IN THE CASE OF M/S. ZEPHYR BIOMEDICALS RELATING TO THIS ISSUE ARE THAT THE AO DURING THE COURSE OF THE ASS ESSMENT NOTED THAT THE ASSESSEE HAS NOT DEDUCTED TDS ON FREIGHT AMOUNT PAID TO THE FORWARDING & CLEARING AGENT (C&F AGENT) . WHEN CALLED FOR, THE ASSESSEE EXPLAINED THAT THE AMOUNT PAID ARE IN THE NATURE OF REIMBURSEMENT OF THE EXPENSES AS TH E AGENT ONLY C OLLECTS THE AMOUNT WHICH ARE PAID BY THEM TO THE AIRLINES. THE AO RELIED ON CBDT CIRCULAR NO. 715 DT. 8.8.1995 WHEREIN IN ANSWER TO QUESTION NO. 6 IT WAS STATED THAT PAYMENT TO CLEARING & FORWARDING AGENTS FOR CARRIAGE OF GOODS SHALL BE SUBJECT TO TAX DED UCTION AT SOURCE. THEY WOULD ALSO BE LIABLE TO DEDUCT TDS WHILE MAKING PAYMENT TO A CARRIER OF GOODS. IN QUESTION NO. 30 IN THE SAME VERY CIRCULAR, THE BOARD CLARIFIED THAT SEC. 194C AND 194J REFERRED TO ANY SUM PAID. THE 3 ITA NO. 121&309/PNJ/2014 (A.YS : 2009 - 10 & 2010 - 11) ITA NO. 122/PNJ/2014 (A.Y : 2009 - 10) AO WAS OF THE VIEW THAT AS PER THE AMENDED PROVISIONS OF SEC. 194C THE FORWARDING & CLEARING AGENTS COME WITHIN THE PURVIEW OF SERVICE CONTRACTORS/TRANSPORT CONTRACTORS. THE AO NOTED THAT THE ASSESSEE HAS MADE THE FOLLOWING PAYMENTS TOWARDS THE FREIGHT TO FORWARDING & CLEARING AGENTS A . FOR 80 1 B UNIT NAME OF THE PARTY TOTAL AMOUNT PAID AMOUNT ON WHICH TDS DEDUCTED AMOUNT ON WHICH TDS NOT DEDUCTED JET AIR FREIGHTERS RS.40,51,960 RS.17,71,227 RS.22,80,733 CLASSIC FREIGHTERS RS.8,38,872 RS.3,70,256 RS.4,68,616 EXPORT FREIGHT RS.14,60,582 NIL RS. 14,60,582 OTHER FREIGHT CHARGES RS.1,84,314 NIL RS.1,84,314 TOTAL NON - DEDUCTION OF TDS RS.43,94,245 B. FOR NON - 801B UNIT NAME OF THE PARTY TOTAL AMOUNT PAID AMOUNT ON WHICH TDS DEDUCTED AMOUNT ON WHICH TDS NOT DEDUCTED JET AIR FREIGHTERS RS.25,64,920 RS.3,56,972 R S. 22,07,948 CLASSIC FREIGHTERS RS. 15,87,955 RS.8,68,844 RS.7,19,111 TOTAL NON - DEDUCTION OF TDS RS.29,27,059 THE AO THEREFORE DISALLOWED SUM OF RS. 73,21,304/ - BY APPLYING PROVISIONS OF SEC. 40(A)(IA) . THE ASSESSEE WENT IN APPEAL BEFORE CIT(A). CIT(A) DELETED THE DISALLOWANCE BY OBSERVING AS UNDER : 8. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT. THE A.O. HAS MADE DISALLOWANCE U/S 40(A)(IA)AS THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE ON PAYMENT MADE TO THE CLEARING AND FORWARDING AGENTS. THE A.O. HAS HELD THAT IN VIEW OF THE AMENDED PROVISIONS U/S 194C AND CBDT CIRCULAR NO.715, DATED 8/8/1995, WHEREIN THE WORK INCLUDES CARRIAGE OF GOODS AND PASSENGERS BY ANY MODE OTHER THA N RAILWAYS AND TRANSPORT CONTRACT SHALL INCLUDE THE SERVICES OF CLEARING AND FORWARDING AGENTS, AND THEREFORE TDS WAS DEDUCTIBLE ON PAYMENTS MADE TO THE CLEARING AND FORWARDING AGENTS. HENCE, DISALLOWANCE U/S 40 (A)(IA) HAS BEEN MADE. ON THE OTHER HAND, THE APPELLANT CONTENDED THAT, IN REALITY, THE PAYMENT IN QUESTION, HAS NOT BEEN MADE TO THE CLEARING AND FORWARDING AGENT, BUT HAS ONLY BEEN REIMBURSED THE AMOUNT, IT SPENT 4 ITA NO. 121&309/PNJ/2014 (A.YS : 2009 - 10 & 2010 - 11) ITA NO. 122/PNJ/2014 (A.Y : 2009 - 10) ON BEHALF OF THE APPELLANT. THE AMOUNT REIMBURSED TO THE C&F AGENT S IS THE ACTUAL AIR FREIGHT PAID BY THEM TO THE AIRLINES. THE APPELLANT CONTENDED THAT THE C&F AGENT PRESENTS THE ACTUAL AIR FREIGHT BILL TO CLAIM THE REIMBURSEMENT AND THIS REIMBURSEMENT DOES NOT HAVE ANY SERVICE CHARGES OR ANY ELEMENT OF PROFIT EMBEDDED IN IT, AND THEREFORE, ON THE FACTS, THE PROVISIONS OF SEC. 194 C OR THE CBDT CIRCULAR IS NOT AP PLICABLE. THE A.O. HAS NOT EXAMINED THE ISSUE IN THE LIGHT OF THESE FACTS AND HAS TAKEN A STAND THAT ALL PAYMENTS MADE TO A C&F AGENT ARE COVERED UNDER TRANSPORT CONTRACT AND PROVISIONS OF SEC. 194C ARE APPLICABLE. THE APPELLANT HAS PLACED RELIANCE ON A HOST OF JUDICIAL PRONOUNCEMENTS, WHEREIN IT HAS BEEN HELD THAT TDS PROVISIONS ARE NOT APPLICABLE ON PURE REIMBURSEMENTS. I AM IN AGREEMENT WITH THE CONTENTION OF TH E APPELLANT, IN VIEW OF THE VARIOUS JUDICIAL PRONOUNCEMENTS QUOTED AND RELIED UPON BY THE APPELLANT AND THE A.O. IS DIRECTED TO DELETE THE DISALLOWANCE MADE U/S 40 (A)(IA) AMOUNTING TO RS.73,21,304/ - . 5. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSI DERED THE SAME ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW AS WELL AS THE EVIDENCES AND THE CASE LAWS RELIED ON BEFORE US. THE LD. AR BEFORE US RELIED ON PGS. 68 TO 73 OF THE PAPER BOOK AND ON THAT BASIS THE LD. AR CLAIMED THAT THE ASSESSEE HAS REIMB URSED TO C&F AGENT THE ACTUAL AIR FREIGHT PAID BY THEM TO THE AIRLINES AND IT IS NOT PAYMENT MADE TO THE C&F AGENT. WE NOTED THAT THERE ARE BILLS OF JET AIR WAYS FROM PG. 69 TO 73 OF THE PAPER BOOK, SUMMARY OF WHICH IS MADE AT PG. 68. PAGE 68 CONSISTS OF INVOICE DT. 12.5.2008 RAISED BY JET AIR FREIGHTERS TO THE ASSESSEE. THE ASSESSEE HAS ISSUED CHEQUE BEARING NO. 46101 DT. 16.5.2008 FOR TOTAL AMOUNT OF RS.2,05,660/ - WHICH ACCORDING TO THE ASSESSEE INCLUDES THE SUM OF RS.1,25,272/ - RELATING TO THE AIR FREI GHT CARTAGE. WE NOTED THAT FROM THE COVERING OF THE BILL THAT THE BILL IS ISSUED BY JET AIR FREIGHTERS AND NOT BY THE C&F AGENT AS CONTENDED BY THE LD. AR. THE AMOUNT PAID BY THE ASSESSEE THROUGH THE CHEQUE IS ALSO RS. 2,05,660/ - AND NOT RS.1,25,272/ - . THE INVOICE NOWHERE STATES THAT IT REPRESENTS REIMBURSEMENT OF THE AIR FREIGHT BUT IT IS THE INVOICE MADE BY JET AIR FREIGHTERS. THIS DOCUMENT, IN OUR OPINION, DOES NOT PROVE THAT THE ASSESSEE HAS REIMBURSED THE AIR FREIGHT PAID BY THE C&F AGENT. THE BILL S RAISED BY JET AIR FREIGHTERS ARE DIRECTLY IN THE NAME OF THE ASSESSEE. IN VIEW OF THESE FACTS, WE DO NOT AGREE WITH THE 5 ITA NO. 121&309/PNJ/2014 (A.YS : 2009 - 10 & 2010 - 11) ITA NO. 122/PNJ/2014 (A.Y : 2009 - 10) CONTENTIONS OF THE ASSESSEE. THE ONUS, IN OUR OPINION, LIES ON THE ASSESSEE TO PROVE THAT THE PAYMENT MADE BY IT TO THE C&F AGENT RE PRESENTS THE REIMBURSEMENT AND NOT THE AMOUNT PAID FOR ANY SERVICES RENDERED BY THEM. 6. WE HAVE ALSO GONE THROUGH CIRCULAR NO. 715 DT. 8.8.1995. WE NOTED THAT IN REPLY TO QUESTION NO. 7 THE CBDT HAS OPINED AS UNDER (RELEVANT EXTRACT IS REPRODUCED) : QUESTION 7 : WHETHER A TRAVEL AGENT/CLEARING AND FORWARDING AGENT WOULD BE REQUIRED TO DEDUCT TAX AT SOURCE FROM THE SUM PAYABLE BY THE AGENT TO AN AIRLINE OR OTHER CARRIER OF GOODS OR PASSENGERS ? ANSWER : THE TRAVEL AGENT, ISSUING TICKETS ON BEHALF OF THE AIRLINES FOR TRAVEL OF INDIVIDUAL PASSENGERS, WOULD NOT BE REQUIRED TO DEDUCT TAX AT SOURCE AS HE ACTS ON BEHALF OF THE AIRLINES. THE POSITION OF CLEARING AND FORWARDING AGENTS IS DIFFERENT. THEY ACT AS I NDEPENDENT CONTRACTORS. ANY PAYMENT MADE TO THEM WOULD, HENCE, BE LIABLE FOR DEDUCTION OF TAX AT SOURCE. THEY WOULD ALSO BE LIABLE TO DEDUCT TAX AT SOURCE WHILE MAKING PAYMENTS TO A CARRIER OF GOODS. THIS QUESTION RELATES TO A SITUATION WHERE THE C&F AGE NT MAKES THE PAYMENT TO THE AIRLINES OR OTHER CARRIER OF GOODS OR PASSENGER. THIS QUESTION, IN OUR OPINION, IS NOT RELEVANT TO DECIDE WHETHER THE ASSESSEE IS REQUIRED TO DEDUCT TAX AT SOURCE WHEN PAYMENT IS MADE TO C&F AGENT. QUESTION NO. 6 DEALS WITH A CASE WHERE THE PAYMENT IS MADE FOR CARRIAGE OF THE GOODS OR PASSENGER BY ANY MODE OF TRANSPORT TO C&F AGENT. IN REPLY TO THIS QUESTION, WE NOTED THAT THE BOARD HAS CLEARLY LAID DOWN IN CIRCULAR NO. 715 DT. 8.8.1995 THAT AS REGARDS PAYMENTS MADE TO CLEARI NG AND FORWARDING AGENTS FOR CARRIAGE OF GOODS, THE SAME SHALL BE SUBJECTED TO TAX DEDUCTION AT SOURCE U/S 194C OF THE ACT. THE LD. AR COULD ALSO NOT ADDUCE ANY EVIDENCE THAT THE C&F AGENT DEDUCTED TAX AT SOURCE WHILE MAKING PAYMENT TO THE CARRIER SO AS TO PROVE THAT THE AMOUNT WHICH WAS PAID BY THE ASSESSEE TO THE C&F AGENT REPRESENTS REIMBURSEMENT OF THE FREIGHT PAID BY THE C&F AGENT ON BEHALF OF THE ASSESSEE TO THE AIRLINES. IT IS NOT THE INTENTION OF THE LEGISLATURE THAT NEITHER THE C&F 6 ITA NO. 121&309/PNJ/2014 (A.YS : 2009 - 10 & 2010 - 11) ITA NO. 122/PNJ/2014 (A.Y : 2009 - 10) AGENT DEDUCTS THE TAX WHEN IT MAKES THE PAYMENT TO THE CARRIER NOR THE ASSESSEE DEDUCTS THE TAX AT SOURCE WHEN IT MAKES PAYMENT TO C&F AGENT. IF THE ASSESSEE CLAIMS THAT THE AMOUNT PAID TO THE C&F AGENT BY THE ASSESSEE REPRESENTS REIMBURSEMENT, THE ONUS IS ON THE ASSE SSEE TO PROVE THAT IT REPRESENTS THE REIMBURSEMENT OF THE CLAIM. IN OUR OPINION, PROVISIONS OF SEC. 194C ARE CLEARLY APPLICABLE IN THE CASE OF THE ASSESSEE. 7. WE HAVE ALSO GONE THROUGH THE VARIOUS DECISIONS AS RELIED ON BY THE LD. AR. IN THE CASE OF D CIT VS. DHAANYA SEEDS (P.) LTD., 42 TAXMANN.COM 277, THE BANGALORE BENCH OF THE TRIBUNAL UNDER PARA 6.4.3 CLEARLY HELD THAT REIMBURSEMENT OF THE EXPENSES BY C&F AGENTS CANNOT BE HELD TO BE CONTRACT/SERVICE ON WHICH THE PROVISIONS OF SEC. 194C WOULD COME IN TO PLAY. IT IS A CASE WHERE THE ASSESSEE HAS PROVED THAT HE REIMBURSED THE ACTUAL EXPENSES INCURRED BY THE C&F AGENT. THUS, THIS JUDGEMENT IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE. 8. IN CASE OF ACIT VS. M/S. P.P. OVERSEAS, 2011 - TOIL - 440 - ITA T - MUM WE NOTED THAT THE MUMBAI BENCH OF THE TRIBUNAL TOOK THE VIEW THAT THE PROVISIONS OF SEC. 194C ARE NOT APPLICABLE. IN THIS CASE WE NOTED THAT THE TRIBUNAL AFTER INTERPRETING THE NATURE OF THE BUSINESS AND THE SERVICES RENDERED BY THE CONTRACTOR TOOK THE VIEW THAT THE CONTRACT BETWEEN THE ASSESSEE & C&F AGENT IS A SERVICE CONTRACT WHICH HAS NOT BEEN SPECIFICALLY INCLUDED IN EXPLANATION III BELOW SEC. 194C. THEREFORE, THEY TOOK THE VIEW THAT THE PROVISIONS OF SEC. 194C ARE NOT APPLICABLE TO THE PAYMENT MADE TO C&F AGENT. UNDER EXPLANATION IV TO SEC. 194C WORK DOES NOT INCLUDE CARRIAGE OF GOODS AND PASSENGER BY RAILWAYS WHILE IN THIS CASE THE CARRIAGE OF THE GOODS WAS BY RAILWAYS . THIS DECISION, THEREFORE, WILL ALSO NOT ASSIST THE ASSESSEE. 7 ITA NO. 121&309/PNJ/2014 (A.YS : 2009 - 10 & 2010 - 11) ITA NO. 122/PNJ/2014 (A.Y : 2009 - 10) 9. IN THE CASE OF ITO VS. M/S. ONS CREATIONS PVT. LTD., THE DELHI BENCH OF THE TRIBUNAL VIDE ITS ORDER DT. 13.5.2011 GAVE A FINDING THAT AMOUNT CLAIMED BY THE FORWARDING AGENT REPRESENTS REIMBURSEMENT OF ACTUAL AMOUNT ON THE BASIS OF SEPARATE BILLS RAISED BY THE M. THIS DECISION, THEREFORE, WILL ALSO NOT ASSIST THE ASSESSEE. 10. WE HAVE ALSO GONE THROUGH THE DECISION OF CIT VS. OPERA GLOBAL PVT. LTD., 2014 - TIOL - 1525 - HC - DEL - IT DT. 25.8.2014. IN THIS CASE ALSO, WE NOTED FROM PARA 13 THAT THE TRIBUNAL HAD ACCEPTED THAT THE PAYMENT REPRESENTS REIMBURSEMENT OF THE AIR FREIGHT CHARGES PAID TO AIRLINES. THEREFORE, DUE TO THIS FINDING OF FACT THE HON'BLE HIGH COURT CONFIRMED THE ORDER OF THE TRIBUNAL. THIS DECISION THEREFORE IS NOT APPLICABLE TO THE FACTS OF THE CASE BEFORE US. 11. BEFORE US, THE LD. AR HAS TAKEN AN ALTERNATE CONTENTION THAT IN CASE THIS TRIBUNAL WANTS TO SUSTAIN THE DISALLOWANCE, IT IS ONLY THE AMOUNT REMAINS TO BE PAID AS ON LAST DAY OF THE FINANCIAL YEAR THAT HAS TO BE DISALLOWED AS IT REPRESENTS THE AMOUNT PAYABLE. THE AMOUNT PAID DURING THE FINANCIAL YEAR CANNOT BE DISALLOWED U/S 40(A)(IA). RELIANCE WAS PLACED BY HIM ON THE DECISION OF THE BOMBAY BENCH O F THE TRIBUNAL IN THE CASE OF M/S. ARCADIA SHARE & STOCK BROKERS PVT. LTD. VS. DCIT DT. 22.12.2014. WE NOTED THAT IN THIS DECISION THE TRIBUNAL FOLLOWED THE ORDER IN THE CASE OF AMIT NARESH SHAH AND TOOK THE VIEW THAT DISALLOWANCE WILL BE RESTRICTED ONLY TO THE AMOUNT PAYABLE AS ON THE LAST DAY OF THE FINANCIAL YEAR. WHILE TAKING THE VIEW IN FAVOUR OF THE ASSESSEE, THE TRIBUNAL OBSERVED THAT THE DECISION OF THE TRIBUNAL WAS BASED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF V E CTOR SHIPPIN G SERVICES (P) LTD. WE DO NOT AGREE WITH THESE OBSERVATIONS OF THE BOMBAY BENCH OF THIS TRIBUNAL. WE NOTED THAT THE HON'BLE SUPREME COURT DISMISSED THE SLP AGAINST JUDGEMENT OF HON'BLE 8 ITA NO. 121&309/PNJ/2014 (A.YS : 2009 - 10 & 2010 - 11) ITA NO. 122/PNJ/2014 (A.Y : 2009 - 10) ALLAHABAD HIGH COURT IN VECTOR SHIPPING SERVICES (P) LTD. , 357 ITR 64 2 AT THE ADMISSION STAGE. THE HON'BLE SUPREME COURT HAS NOT GONE INTO THE MERITS OF THE ISSUE AND HAS NOT LAID DOWN ANY LAW. THE DISMISSAL OF THE SLP AT THE ADMISSION STAGE CANNOT BE TREATED AS DECLARATION OF LAW UNDER ARTICLE 141 OF THE CONSTITUTION OF INDIA. THE HON'BLE SUPREME COURT IN THE CASE OF SMT. TEJ KUMARI & ORS. VS. CIT, 247 ITR 210 AT PG. 213 HAS HELD AS UNDER : IT IS, THEREFORE, NOTICED THAT IT IS NOT A CASE WHERE A SPECIAL LEAVE PETITION WAS SUMMARILY DISMISSED BY THE SUPREME COURT RATHER THE CIVIL APPEAL WAS HEARD ON THE MERITS AND THEREAFTER IT WAS DISMISSED HOLDING THAT THE APPEAL HAS NO MERIT. IT IS A WELL SETTLED PRINCIPLE OF LAW THAT WHEN A SPECIAL LEAVE PETITION IS SUMMARILY DISMISSED UNDER ARTICLE 136 OF THE CONSTITUTION, SUCH DISM ISSAL DOES NOT LAY DOWN ANY LAW RATHER IT SHALL BE DEEMED THAT THE SUPREME COURT HAS SIMPLY HELD THAT IT IS NOT A FIT CASE WHERE SPECIAL LEAVE PETITION SHOULD BE GRANTED. THE SAME PRINCIPLE WILL NOT APPLY IN A CASE WHERE A CIVIL APPEAL IS DISMISSED BY THE SUPREME COURT HOLDING THAT THE APPEAL HAS NO MERIT. IN OUR OPINION, WHEN ONCE A CIVIL APPEAL IS DISMISSED AFTER HEARING THE PARTIES BY THE SUPREME COURT HOLDING THAT THE APPEAL HAS NO MERIT THEN SUCH ORDER BECOMES ONE WHICH ATTRACTS ARTICLE 141 OF THE CONS TITUTION, WHICH PROVIDES THAT THE LAW DECLARED BY THE SUPREME COURT SHALL BE BINDING ON ALL THE COURTS WITHIN THE TERRITORY OF INDIA. WE, THEREFORE, DO NOT AGREE WITH THE OBSERVATIONS MADE BY THE B E N C H IN THE ORDER DT. 22.12.2014 IN THE CASE OF M/S. ARCADIA SHARE & STOCK BROKERS PVT. LTD. VS. DCIT. 12. WE NOTED THAT THIS QUESTION HAD ARISEN BEFORE THE SPECIAL BENCH OF THIS TRIBUNAL IN MERILYN SHIPPING & TRANSPORTS VS. ADDL. CIT, 16 ITR (TRIB) 1 IN WHICH THE SPECIAL BENCH TOOK THE VIEW THAT THE PROVISIONS OF SEC. 40(A)(IA) IS APPLICABLE ONLY IN RESPECT OF THE AMOUNT REMAINS PAYABLE ON THE LAST DAY OF THE FINANCIAL YEAR. WHEN THE MATTER WENT BEFORE THE HON'BLE ANDHRA PRADESH HIGH COURT, THEIR LOR DSHIPS VIDE INTERIM JUDGEMENT STAYED THE OPERATION OF THE ORDER. IN THE MEANTIME, SIMILAR ISSUE WAS RAISED BEFORE THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIKANDARKHAN N. TUNVAR , 357 ITR 312 AND BEFORE THE HON'BLE CALCUTTA HIGH COURT IN THE C ASE OF CIT VS. 9 ITA NO. 121&309/PNJ/2014 (A.YS : 2009 - 10 & 2010 - 11) ITA NO. 122/PNJ/2014 (A.Y : 2009 - 10) CRESCENT EXPORTS SYNDICATE (ITA NO. 23 OF 2013). THE QUESTION BEFORE THE HON'BLE GUJARAT HIGH COURT WAS FRAMED AS UNDER : '1. WHETHER THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE INCOME - TAX ACT, 1961, COULD BE MADE ONLY IN RESPECT OF SUCH AMOUNTS WHICH ARE PAYABLE AS ON MARCH 31 OF THE YEAR UNDER CONSIDERATION ? 2. WHETHER THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS V. ADDL. CIT LAYS DOWN CORRECT LAW ?' WHEN SIMILAR ISSUE WAS BEFOR E THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORTS SYNDICATE ( SUPRA ) , THE HON'BLE CALCUTTA HIGH COURT TOOK THE VIEW AS UNDER : 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 MERILYN SHIPPING AND TRANSPORTS . WE ALREADY HAVE QUOTED EXTENSIVELY BOTH THE MAJORITY AND THE MINORITY VIEWS EXPRESSED IN THE AFORESAID CASE. THE MAIN THRUST OF THE MAJORITY VIEW IS BASED ON THE FACT THAT THE LEGISLATURE HAS REPLACED THE EXPRESSION AMOUNTS CREDITED OR PAID WITH THE EXPRESSION PAYABLE IN THE FINAL ENACTMENT. COMPARISON BETWEEN THE PRE - AMENDMENT AND POST AMENDMENT LAW IS PERMISSIBLE FOR THE P URPOSE 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 IN THE CASE OF CIT VS. KELVINATOR REPORTED IN 2010(2) SCC 723. BUT THE SAME COMPARISON BETWEEN THE DRAFT AND THE ENACTED LAW IS NOT PERMISSIBLE. NOR CAN THE DRAFT OR THE BILL BE USED FOR THE PURPOSE OF REGULATING THE MEANING AND PURPORT OF THE ENACTED LAW. IT IS THE FINALLY ENACTED LAW WHICH IS THE WILL OF THE LEGISLATURE. THE LEARNED TRIBUNAL FEL L INTO AN ERROR IN NOT REALIZING THIS ASPECT OF THE MATTER. THE LEARNED TRIBUNAL HELD THAT WHERE LANGUAGE IS CLEAR THE INTENTION OF THE LEGISLATURE IS TO BE GATHERED FROM THE LANGUAGE USED. HAVING HELD SO, IT WAS NOT OPEN TO SEEK TO INTERPRET THE SECTI ON ON THE BASIS OF ANY COMPARISON BETWEEN THE DRAFT AND THE SECTION ACTUALLY ENACTED NOR WAS IT OPEN TO SPECULATE AS TO THE EFFECT OF THE SO - CALLED REPRESENTATIONS MADE BY THE PROFESSIONAL BODIES. 10 ITA NO. 121&309/PNJ/2014 (A.YS : 2009 - 10 & 2010 - 11) ITA NO. 122/PNJ/2014 (A.Y : 2009 - 10) THE LEARNED TRIBUNAL HELD THAT SECTION 40(A)(IA) OF THE ACT CREATES A LEGAL FICTION BY VIRTUE OF WHICH EVEN THE GENUINE AND ADMISSIBLE EXPENSES CLAIMED BY AN ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION: IF THE ASSESSEE DOES NOT DEDUCT TDS ON SUCH EXPENSES ARE DISALLOWED. HAVING HELD SO WAS IT OPEN TO THE TRIBUNAL TO SEEK TO JUSTIFY THAT THIS FICTION CANNOT BE EXTENDED ANY FURTHER AND, THEREFORE, CANNOT BE INVOKED BY ASSESSING OFFICER TO DISALLOW THE GENUINE AND REASONABLE EXPENDITURE ON THE AMOUNTS OF EXPENDITURE ALREADY PAID? DOES THIS NO T AMOUNT TO DELIBERATELY READING SOMETHING IN THE LAW WHICH IS NOT THERE? WE, AS SUCH, HAVE NO DOUBT IN OUR MIND THAT THE LEARNED TRIBUNAL REALIZED THE MEANING AND PURPORT OF SECTION 40(A)(IA) CORRECTLY WHEN IT HELD THAT IN CASE OF OMISSION TO DEDUCT TAX EVEN THE GENUINE AND ADMISSIBLE EXPENSES ARE TO BE DISALLOWED. BUT THEY SOUGHT TO REMOVE THE RIGOUR OF THE LAW BY HOLDING THAT THE DISALLOWANCE SHALL BE RESTRICTED TO THE MONEY WHICH IS YET TO BE PAID. WHAT THE TRIBUNAL BY MAJORITY DID WAS TO SUPPLY THE C ASUS 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 STEEL INDUSTRIES VS. BOMBAY IRON & STEEL LABOUR BOARD REPORTED IN 2010(2) SCC 273. UNPROTECTED WORKER WAS FINALLY DEFINED IN SECTION 2(11) 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 THERE IN THE BILL WAS REJECTED BY THE SUPREME COURT BY HOLDING AS 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 OF 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 A ND 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 LEGISLATIV E INTENT THAT THE LEGISLATURE BEING CONSCIOUS OF THE FACT AND BEING ARMED WITH ALL THE COMMITTEE REPORTS AND ALSO BEING ARMED WITH THE FACTUAL DATA, DELIBERATELY AVOIDED THOSE WORDS. WHAT THE APPELLANTS ARE ASKING WAS TO READ IN THAT DEFINITION, THESE PREC ISE WORDS, WHICH WERE CONSCIOUSLY AND DELIBERATELY OMITTED FROM THE DEFINITION. THAT WOULD AMOUNT 11 ITA NO. 121&309/PNJ/2014 (A.YS : 2009 - 10 & 2010 - 11) ITA NO. 122/PNJ/2014 (A.Y : 2009 - 10) 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 EX TREMELY CLEAR AND SETTLED THAT THOUGH THIS COURT MAY SUPPLY THE CASUS OMISSUS, IT WOULD BE IN THE RAREST OF THE RATE CASE AND THUS SUPPLYING OF THIS CASUS OMISSUS WOULD BE EXTREMELY NECESSARY DUE TO THE INADVERTENT OMISSION ON THE PART OF THE LEGISLATURE. BUT, THAT IS CERTAINLY NOT THE CASE HERE. WE SHALL NOW ENDEAVOUR TO SHOW THAT NO OTHER INTERPRETATION IS POSSIBLE. THE KEY WORDS USED IN SECTION 40(A)(IA), ACCORDING TO US, ARE ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII - B. IF THE QUESTIO N IS WHICH EXPENSES ARE SOUGHT TO BE DISALLOWED? THE ANSWER IS BOUND TO BE THOSE EXPENSES ON WHICH TAX IS DEDUCTIBLE AT SOURCE 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 A N 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 SUSCEPTI BLE TO GIVING MORE THAN ONE MEANING. BY LOOKING AT THE DRAFT IT COULD BE SAID THAT THE LEGISLATURE WANTED TO TREAT THE PAYMENTS MADE OR CREDITED IN FAVOUR OF A CONTRACTOR O R SUB - CONTRACTOR DIFFERENTLY THAN THE PAYMENTS ON ACCOUNT OF INTEREST, COMMISSION OR BROKERAGE, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES BECAUSE THE WORDS A MOUNTS CREDITED OR PAID WERE USED ONLY IN RELATION TO A CONTRACTOR O R SUB - CONTRACTOR. THIS DIFFERENTIAL TREATMENT WAS NOT INTENDED. THEREFORE, THE LEGISLATURE PR OVIDED THAT THE AMOUNTS, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER 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 O R SUB - CONTRACTOR SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME OF AN ASSESSEE IN CASE HE HAS NOT DEDUCTED, OR AFTER DEDUCTION HAS NOT PAID WITHIN THE SPECIFIED TIME. THE LANGUAGE USED BY THE LEGISLATURE IN THE FINALLY ENACTED LAW IS CLEAR AND UNAMBIGUOUS WHEREAS THE LANGUAGE USED IN THE BILL WAS AMBIGUOUS. A FEW WORDS ARE NOW NECESSARY TO DEAL WITH THE SUBMISSION 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 INTEND ED BY THE LEGISLATURE. THIS IS OUR ANSWER TO THE SUBMISSION OF MR. BAGCHI. THE SUBMISSION OF MR. ROYCHOWDHURI THAT THE SECOND PROVISO SOUGHT TO BECOME EFFECTIVE FROM 1 ST 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. 12 ITA NO. 121&309/PNJ/2014 (A.YS : 2009 - 10 & 2010 - 11) ITA NO. 122/PNJ/2014 (A.Y : 2009 - 10) FOR THE REASONS DISCUSSED AB OVE, WE ARE OF THE OPINION THAT THE MAJORITY VIEWS EXPRESSED IN THE CASE OF MERILYN SHIPPING & TRANSPORTS ARE NOT ACCEPTABLE. THE SUBMISSIONS ADVANCED BY LEARNED ADVOCATES HAVE ALREADY BEEN DEALT WITH AND REJECTED. 13. WE HAVE ALSO GONE THROUGH THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN VECTOR SHIPPING SERVICES (P) LTD., 357 ITR 642 ( SUPRA ). WE NOTED THAT IN THIS CASE THE FOLLOWING SUBSTANTIAL QUESTION WAS ADMITTED : '(A) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE INCOME - TAX APPELLATE TRIBUNAL HAS RIGHTLY CONFIRMED THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) AND THEREBY DELETING THE DISALLOWANCE OF RS. 1,17,68,621 MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF THE INCOME - TAX ACT, 1961, BY IGNORING THE FACT THAT THE COMPANY M/S. MERCATOR LINES LTD. HAD PERFORMED SHIP MANAGEMENT WORK ON BEHALF OF THE ASSESSEE M/S. VECTOR SHIPPING SERVICES (P.) LTD. AND THERE WAS A MEMORANDUM OF UNDERSTANDING SIGNED BETWEEN BOTH THE COMPANIES AND AS PER THE DEFINITION OF MEMORANDUM OF UNDERSTANDING, IT INCLUDED CONTRACT ALSO ?' UPON HEARING PARTIES AND UPON PERUSING MATERIAL ON RECORD, THE HON'BLE JURISDICTIONAL HIGH COURT WAS OF THE CONSIDERED V IEW THAT (PAGE 645 OF 357 ITR) WE DO NOT FIND THAT THE TRIBUNAL HAS COMMITTED ANY ERROR IN RECORDING THE FINDING ON THE FACTS, WHICH WERE NOT CONTROVERTED BY THE DEPARTMENT AND THUS THE QUESTION OF LAW AS FRAMED DOES NOT ARISE FOR CONSIDERATION IN THE APP EAL. IN PLAIN WORDS, WHAT THEIR LORDSHIPS DID WAS SIMPLY REJECTION OF THE QUESTION OF LAW PROPOSED BY THE INCOME TAX DEPARTMENT BY OBSERVING THAT THIS QUESTION OF LAW DOES NOT ARISE FOR CONSIDERATION IN THE APPEAL. 14. ON THIS, THE AGRA BENCH OF THE TRI BUNAL IN THE CASE OF DCIT VS. GUPTA OVERSEAS IN ITA NO. 1961 FOR A.Y 2008 - 09 OBSERVED AS UNDER : 35. HAVING NOTED THE ABOVE, WE MUST ALSO TAKE NOTE OF THE FACT THAT THERE IS INDEED AN OBSERVATION OF THEIR LORDSHIPS TO THE EFFECT THAT 'THIS IS TO BE NOTED , FOR DISALLOWING EXPENSES FROM BUSINESS OR PROFESSION ON THE GROUND THAT TDS HAS NOT BEEN DEDUCTED, THE AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY THE END OF THE YEAR' BUT SUCH AN OBSERVATION MAY PROBABLY STEM FROM THE FACT THAT APPARENTLY TH E INCOME - TAX DEPARTMENT DID NOT QUESTION THE LAW LAID DOWN BY THE 13 ITA NO. 121&309/PNJ/2014 (A.YS : 2009 - 10 & 2010 - 11) ITA NO. 122/PNJ/2014 (A.Y : 2009 - 10) SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS V. ADDL. CIT [2012] 16 ITR (TRIB) 1 (VISHAKAPATNAM) [SB] AND THAT IS PRECISELY WHAT THE SPECIAL BENCH HAD HELD. IN THESE CIRCUMST ANCES, THE QUESTION THAT WE SHOULD NORMALLY ASK OURSELVES IS WHETHER WE SHOULD PROCEED ON THE BASIS THAT THE SPECIAL BENCH DECISION IN THE CASE OF MERILYN SHIPPING AND TRANSPORT INDEED STANDS APPROVED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE ABOVEMENTIONED DECISION IN CIT V. VECTOR SHIPPING SERVICES P. LTD. [2013] 357 ITR 642 (ALL). 36. OF COURSE, THERE IS A SCHOOL OF THOUGHT THE VIEWS EXPRESSED BY THE HON'BLE COURTS ABOVE, WHETHER AS A PART OF THE DECISION OR AS ON OBITER DICTA OR IN ANY OTHER MANNER, SHOULD BE GIVEN FULLEST POSSIBLE RESPECT, AND, WITHOUT GOING INTO MUCH ANALYSIS, FOLLOW ED IN LETTER AND SPIRIT. AFTER ALL, EVERYTHING WE DO IS, AND SHALL ALWAYS REMAIN, SUBJECT TO THE JUDICIAL SCRUTINY BY THEIR LORDSHIPS, AND, IF THERE ARE ANY ERROR AND OMISSION IN OUR BONA FIDE FOLLOWING THE ESTEEMED VIEWS OF THEIR LORDSHIPS, THESE ERRORS A ND OMISSIONS CAN BE RECTIFIED AT THAT STAGE OF JUDICIAL SCRUTINY. ONE MAY POSSIBLY UNDERSTAND DISCOMFORT IN TREATING THE WORDS OF THE HON'BLE COURTS ABOVE AS A BLIND MAN'S WALKING STICK RATHER THAN AS LUMINOSITY OF JUDICIAL LAMP ENABLING IMPARTING OF JUSTI CE, AND THUS ERRING ON THE SIDE OF EXCESSIVE CAUTION, BUT, APART FROM ALL OTHER VIRTUES OF SUCH AN APPROACH, IT IS CERTAINLY A SAFE APPROACH. GOING BY THIS SCHOOL OF THOUGHT, NOW THAT THEIR LORDSHIPS OF THE HON'BLE JURISDICTIONAL HIGH COURT HAVE OBSERVED, IN WHATEVER SETTING AND CONTEXT, THAT 'THIS IS TO BE NOTED, FOR DISALLOWING EXPENSES FROM BUSINESS OR PROFESSION ON THE GROUND THAT TDS HAS NOT BEEN DEDUCTED, THE AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY THE END OF THE YEAR', WE COULD PROCEE D ON THE BASIS THAT THIS PROPOSITION HAS THE APPROVAL OF THEIR LORDSHIPS. 37. THERE COULD ALSO BE A SCHOOL OF THOUGHT THAT SINCE THE CORRECTNESS OR OTHERWISE OF THE CASE OF MERILYN SHIPPING AND TRANSPORTS V. ADDL. CIT [2012] 16 ITR (TRIB) 1 (VISHAKAPATNAM ) [SB] DID NOT EVEN FALL FOR CONSIDERATION BY THE HON'BLE JURISDICTIONAL HIGH COURT, IT CANNOT BE SAID THAT THE HON'BLE JURISDICTIONAL HIGH COURT HAS APPROVED THE VIEW TAKEN BY THE SPECIAL BENCH IN MERILYN SHIPPING AND TRANSPORTS. THE CONCEPTUAL SUPPORT FO R THIS PROPOSITION COULD BE THIS. AS A READING OF THE SUBSTANTIAL QUESTION OF LAW BEFORE THEIR LORDSHIP'S CASE WOULD CLEARLY SHOW THAT THE QUESTION WHICH FELL FOR ADJUDICATION BY THEIR LORDSHIPS WAS ALTOGETHER DIFFERENT, I.E., WHETHER CARRYING OUT OF WORK BY MERCATOR LINES LTD. UNDER THE MEMORANDUM OF UNDERSTANDING, WHICH INCLUDED CONTRACT, THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WERE ATTRACTED. AS THEIR LORDSHIPS OBSERVED IN UNAMBIGUOUS WORDS, THIS QUESTION DID NOT ARISE FROM THE TRIBUNAL'S ORDER AN D THAT WAS THE REASON WHY THEIR LORDSHIPS DECLINE TO CONSIDER THE SAME. AS OBSERVED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. SUN ENGINEERING WORKS P. LTD. [1992] 198 ITR 297 (SC) (PAGE 320) : 'THE JUD GMENT MUST BE READ AS A WHOLE AND THE OBSERVATIONS FROM THE JUDGMENT HAVE TO BE CONSIDERED IN THE LIGHT OF THE QUESTION WHICH WERE BEFORE THIS COURT' AND THAT 'A DECISION OF THIS COURT TAKES ITS 14 ITA NO. 121&309/PNJ/2014 (A.YS : 2009 - 10 & 2010 - 11) ITA NO. 122/PNJ/2014 (A.Y : 2009 - 10) COLOUR FROM THE QUESTIONS INVOLVED IN THE CASE IN WHICH IT IS RENDERED AND, WHILE APPLYING THE DECISION TO A LATER CASE, THE COURTS MUST CAREFULLY TRY TO ASCERTAIN THE TRUE PRINCIPLE LAID DOWN BY THE DECISION OF THIS COURT AND NOT TO PICK OUT WORDS OR SENTENCES FROM THE JUDGMENT, DIVORCED FROM THE CONTEXT OF THE QUE STIONS UNDER CONSIDERATION BY THIS COURT, TO SUPPORT THEIR REASONING'. WHAT WAS THUS EXPRESSED FOR ANALYSING DECISION OF THE HON'BLE SUPREME COURT MUST EQUALLY APPLY IN ANALYSING OF THE HON'BLE HIGH COURT'S JUDGMENT. IT COULD THUS BE, BY THIS SCHOOL OF THO UGHT, WHOLLY INAPPROPRIATE TO PROCEED ON THE BASIS OF THE RATIO OF MERILYN SHIPPING AND TRANSPORTS STANDS APPROVED BY THE HON'BLE JURISDICTIONAL HIGH COURT PARTICULARLY WHEN THAT ASPECT OF THE MATTER WAS NOT EVEN IN CHALLENGE BEFORE THEIR LORDSHIPS. HOWEVE R, ONE OF THE DEMERITS IF WE CAN TERM IT AS A DEMERIT OF THIS SCHOOL OF THOUGHT IS THAT THERE IS AN INHERENT RISK OF BEING LESS THAN RIGHT IN SUCH A SUBJECTIVE DECISION, AS IN ANY CEREBRAL PURSUIT. 15. IN VIEW OF THE AFORESAID DISCUSSION AND THE FACT THA T THE HON'BLE GUJARAT HIGH COURT AND HON'BLE CALCUTTA HIGH COURT HAD DECIDED THE ISSUE ON MERIT, WE DO NOT AGREE WITH THE ALTERNATE SUBMISSION OF THE ASSESSEE AND ARE OF THE VIEW THAT THE DECISION OF THE BOMBAY BENCH OF THE TRIBUNAL IN ITA NO. 1871/MUM/201 3 IN THE CASE OF M/S. ARCADIA SHARE & STOCK BROKERS PVT. LTD. VS. DCIT WILL NOT ASSIST THE ASSESSEE AS THIS DECISION HAS SIMPLY TOOK THE VIEW THAT THE ISSUE IS COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF VECTOR SHIPPING SERVICES (P) LTD. ( SUPRA ) WHILE THE FACTS ARE NOT SO. WE HAVE ALSO GONE THROUGH THE DECISION OF THE BANGALORE BENCH IN DCIT VS. ANANDA MARAKALA DT. 13.9.2013 (150 ITD 323). WE NOTED THAT IN THIS DECISION THE TRIBUNAL TOOK THE VIEW THAT THE DIFFERENT HIGH COURTS HAVE TAKEN DIVERGENT VIEWS ON THE IMPUGNED ISSUE AND THEREFORE THEY HAVE TAKEN A VIEW IN FAVOUR OF THE ASSESSEE. WE HAVE ALREADY DISCUSSED THAT IN THE CASE OF VECTOR SHIPPING SERVICES (P) LTD. ( SUPRA ) THE QUESTION BEFORE THE HON'BLE HIGH COURT DID NOT RELATE TO PAYABLE OR PAID AND THE HON'BLE HIGH COURT HAS NOT DECIDED THE QUESTION ON MERIT BUT HAS SIMPLY MADE OBSERVATION AS THE COUNSEL FOR THE DEPARTMENT DID NOT QUESTION THE LAW LAID DOWN BY THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTS V S. ADDL. CIT, 16 ITR (TRIB) 1 ( SUPRA ). EVEN THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT AS 15 ITA NO. 121&309/PNJ/2014 (A.YS : 2009 - 10 & 2010 - 11) ITA NO. 122/PNJ/2014 (A.Y : 2009 - 10) WELL AS THE HON'BLE GUJARAT HIGH COURT WHICH WERE PRIOR TO THE DECISION RENDERED BY THE HON'BLE ALLAHABAD HIGH COURT W E R E NOT C I T E D BEFORE THE HON'BLE ALLAHABAD HIGH COURT AS THE QUESTION INVOLVED DID NOT RELATE TO THIS ISSUE. WE, THEREFORE, ARE OF THE VIEW THAT THE DECISION IN THE CASE OF M/S. ARCADIA SHARE & STOCK BROKERS PVT. LTD. VS. DCIT ( SUPRA ) WILL NOT ASSIST THE ASSESSEE. ACCORDINGLY, WE SET A SIDE THE ORDER OF CIT(A) IN ALL THE CASES AND RESTORE THE ORDER OF AO BY ALLOWING THE APPEALS OF THE REVENUE . 16. IN THE RESULT, ALL THE APPEALS FILED BY THE REVENUE STAND ALLOWED. 17. ORDER PRONOUNCED IN THE OPEN COURT ON 1 6 /01/2015 . S D / - ( D.T.GARASIA) JUDICIAL MEMBER S D / - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 1 6 /01/ 201 5 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT S (I) M/S. ZEPHYR BIOMEDICALS & (II) M/S. ORCHID BIOMEDICAL SYSTEMS (3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER ,