Appeal details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 7749 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
5 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-03-2016
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
B
Next Hearing Date
09-02-2016
Assessment Year
2011-2012
Appeal Filed On
05-10-2015
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2039/MDS/2015 ( )( / ASSESSMENT YEAR : 2011-12 M/S SAS HOTELS AND ENTERPRISES LTD., 3, MANGESH STREET, T. NAGAR, CHENNAI - 600 017. PAN : AAECS 1194 C V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE IV(2), CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) ./ ITA NO.2041/MDS/2015 ( )( / ASSESSMENT YEAR : 2011-12 THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(2), CHENNAI - 600 034. V. M/S SAS HOTELS AND ENTERPRISES LTD., 3, MANGESH STREET, T. NAGAR, CHENNAI - 600 017. (+,/ APPELLANT) (-.+,/ RESPONDENT) (/0 1 2 /ASSESSEE BY : SHRI S. RAMACHANDRA RAO, CA 3 1 2 /REVENUE BY : SHRI A.B. KOLI, JCIT 4 1 0% / DATE OF HEARING : 09.02.2016 5') 1 0% / DATE OF PRONOUNCEMENT : 18.03.2016 2 I.T.A. NOS.2039 & 2041/MDS/15 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH THE APPEALS OF THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE SAME ORDER OF THE COMMISSIONER OF INCOM E TAX (APPEALS) 18, CHENNAI, DATED 24.07.2015 AND PERTA IN TO ASSESSMENT YEAR 2011-12. THEREFORE, WE HEARD BOTH THE APPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON O RDER. 2. FIRST, LETS TAKE THE ASSESSEES APPEAL IN I.T.A . NO.2039/MDS/2015. 3. SHRI S. RAMACHANDRA RAO, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO DISALLOWANCE MADE BY THE ASSESSING O FFICER UNDER SECTION 14A OF THE ACT. ACCORDING TO THE LD. REPRE SENTATIVE, ALL THE INVESTMENTS WERE MADE FROM AND OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. ACCORDING TO THE LD. REPRESENTA TIVE, THE PROFIT FOR THE YEAR UNDER CONSIDERATION WAS ` 33.65 CRORES. NO BORROWED FUNDS WERE USED FOR MAKING INVESTMENT FOR EARNING T HE EXEMPTED INCOME. THEREFORE, ACCORDING TO THE LD. REPRESENTA TIVE, NO DISALLOWANCE CAN BE MADE FOR THE YEAR UNDER CONSIDE RATION. 3 I.T.A. NOS.2039 & 2041/MDS/15 4. ON THE CONTRARY, SH. A.B. KOLI, THE LD. DEPARTME NTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE CLAIMS THAT NO EXPENDITURE WAS INCURRED FOR EARNING EXEMPTED INCOM E AND THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE WER E USED FOR MAKING INVESTMENTS. SINCE THE ASSESSEE CLAIMS THAT NO EXPENDITURE WAS INCURRED, ACCORDING TO THE LD. D.R. , RULE 8D OF THE INCOME-TAX RULES, 1962 WOULD COME INTO OPERATION. THEREFORE, THE ASSESSING OFFICER BY APPLYING THE THIRD LIMB OF RUL E 8D(2) MADE DISALLOWANCE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLAIMS THAT SURPLUS FUNDS WERE AVAILABLE AND THE PR OFIT FOR THE YEAR UNDER CONSIDERATION WAS ` 33.65 CRORES. THE ASSESSEE ALSO CLAIMS THAT NO BORROWED FUNDS WERE USED FOR MAKING INVESTM ENTS. IN THE ABSENCE OF ANY MATERIAL AVAILABLE ON RECORD TO PROV E THAT THE ASSESSEE HAD BORROWED FUNDS AND NOT INCURRED DIRECT OR INDIRECT EXPENDITURE BY WAY OF INTEREST, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE THIRD LIMB OF RULE 8D(2) WOULD COM E INTO OPERATION. THEREFORE, AN AMOUNT EQUAL TO 0.5% OF THE AVERAGE V ALUE OF INVESTMENTS, INCOME FROM WHICH DOES NOT FORM PART O F TOTAL INCOME, 4 I.T.A. NOS.2039 & 2041/MDS/15 AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE O N THE FIRST DAY AND LAST DAY OF THE PREVIOUS YEAR, HAS TO BE TAKEN AS EXPENDITURE. IN FACT, THE ASSESSING OFFICER HAS APPLIED THIRD LI MB OF RULE 8D(2). THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND THE SAME IS CONFIR MED. 6. NOW COMING TO REVENUES APPEAL, THE FIRST GROUND RAISED BY THE REVENUE IS WITH REGARD TO DISALLOWANCE OF CLAIM MADE UNDER SECTION 80-IA OF THE ACT. 7. SH. A.B. KOLI, THE LD. DEPARTMENTAL REPRESENTATI VE, SUBMITTED THAT THE CIT(APPEALS) ALLOWED THE CLAIM O F THE ASSESSEE UNDER SECTION 80-IA OF THE ACT IN RESPECT OF THE WI NDMILL BY PLACING RELIANCE ON THE JUDGMENT OF MADRAS HIGH COURT IN VE LAYUDHASWAMY SPINNING MILLS (P) LTD. V. ACIT (231 CTR 368) AND T HE ORDER OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE IN I.T.A. NOS.4 77 TO 479/MDS/2011 FOR ASSESSMENT YEARS 2003-04 TO 2005-0 6 DATED 30 TH MAY, 2011. ACCORDING TO THE LD. D.R., THE REVENUE HAS ALREADY FILED AN APPEAL AGAINST THE ORDER OF THIS TRIBUNAL BEFORE THE HIGH COURT AND THE SAME IS PENDING. 5 I.T.A. NOS.2039 & 2041/MDS/15 8. WE HAVE HEARD SHRI S. RAMACHANDRA RAO, THE LD. REPRESENTATIVE FOR THE ASSESSEE ALSO. ADMITTEDLY, THE CIT(APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE BY RELYING THE O RDER OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE. THE ONLY CLAI M OF THE REVENUE IS THAT AN APPEAL IS PENDING BEFORE THE HIG H COURT AGAINST THE ORDER OF THIS TRIBUNAL. A SIMILAR VIEW WAS TAK EN BY THE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING M ILLS (P) LTD. V. ACIT (231 CTR 368). SINCE THE MADRAS HIGH COURT AF FIRMED THE VIEW TAKEN BY THE TRIBUNAL IN FAVOUR OF THE ASSESSE E, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE UNDER SECTION 80-IA OF TH E ACT. 9. THE NEXT GROUND OF APPEAL RAISED BY THE REVENUE IS WITH REGARD TO DISALLOWANCE UNDER SECTION 40(A)(IA) OF T HE ACT. 10. SH. A.B. KOLI, THE LD. DEPARTMENTAL REPRESENTAT IVE, SUBMITTED THAT THE CIT(APPEALS) BY PLACING RELIANCE ON THE JUDGMENT OF ALLAHABAD HIGH COURT IN CIT V. VECTOR SHIPPING S ERVICES (P) LTD. (2013) 357 ITR 642, ALLOWED THE CLAIM OF THE ASSESS EE. ACCORDING TO THE LD. D.R., THIS TRIBUNAL IN ITO V. SHRI D. UM APATHY IN I.T.A. NO. 2435/MDS/2014 DATED 14.08.2015, AFTER CONSIDERI NG THE JUDGMENT OF ALLAHABAD HIGH COURT IN VECTOR SHIPPING SERVICES (P) 6 I.T.A. NOS.2039 & 2041/MDS/15 LTD. (SUPRA) FOUND THAT THE ALLAHABAD HIGH COURT MA DE A PASSING REFERENCE ABOUT THE DECISION OF SPECIAL BENCH OF TH IS TRIBUNAL, WHEREAS, THE CALCUTTA HIGH COURT IN CIT V. CRESCENT EXPORT SYNDICATES AND GUJARAT HIGH COURT IN CIT V. SIKANDA RKHAN N. TUNVAR EXAMINED THE ISSUE ELABORATELY AND FOUND THA T THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IS NOT SUSTAINABL E IN LAW. BY FOLLOWING THE JUDGMENT OF CALCUTTA HIGH COURT AND G UJARAT HIGH COURT, THIS TRIBUNAL FOUND THAT THE ASSESSEE HAS TO DEDUCT TAX IN RESPECT OF THE AMOUNT PAID. THEREFORE, THE DECISIO N OF ALLAHABAD HIGH COURT IN VECTOR SHIPPING SERVICES (P) LTD. (SU PRA) IS NOT APPLICABLE. IN VIEW OF THE DECISION OF THIS TRIBUN AL IN SHRI D. UMAPATHY (SUPRA), ACCORDING TO THE LD. D.R., THE OR DER OF THE CIT(APPEALS) NEEDS TO BE REVERSED. 11. ON THE CONTRARY, SHRI S. RAMACHANDRA RAO, THE L D. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ALLAHABAD HIGH COURT IN VECTOR SHIPPING SERVICES (P) LTD. (SUPRA) CONFIRMED THE ORDER OF THE SPECIAL BENCH OF THIS TRIBUNAL IN MERI LYN SHIPPING AND TRANSPORT V. ACIT (2012) 16 ITR (TRIB.) 1 (SB), THE REFORE, THE CIT(APPEALS) BY PLACING THE JUDGMENT OF ALLAHABAD H IGH COURT, HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. 7 I.T.A. NOS.2039 & 2041/MDS/15 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ISSUE OF DEDUCTION UNDER SECTION 40(A)(IA) OF THE ACT WAS EL ABORATELY CONSIDERED BY THIS TRIBUNAL IN SHRI D. UMAPATHY (SU PRA). THIS TRIBUNAL, IN FACT, HAS OBSERVED AS FOLLOWS:- 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS AN ADMITTED FACT THAT THE POINT OF DEDUCTION OF TAX AT SOURCE IS AT THE TIME OF PAYMENT OR CREDIT OF THE AMOUNT TO THE ACCOUNT OF T HE PAYEE. NO PROVISION OF INCOME-TAX ACT REQUIRES THE ASSESSEE T O DEDUCT TAX AT SOURCE IN RESPECT OF THE AMOUNT WHICH WAS NOT PAID. IN OTHER WORDS, IN RESPECT OF THE AMOUNT WHICH REMAINS PAYAB LE OR TO BE CREDITED, THE INCOME-TAX ACT DOES NOT REQUIRE DEDUC TION OF TAX. THEREFORE, IF THE ASSESSEE HAS NOT PAID OR CREDITED ANY AMOUNT TO THE ACCOUNT, THEN THERE IS NO QUESTION OF DEDUCTION OF TAX UNDER ANY OF THE PROVISION OF THE INCOME-TAX ACT. THE CO NTENTION OF THE ASSESSEE THAT THE TAX HAS TO BE DEDUCTED ONLY ON TH E AMOUNT REMAINS PAYABLE ON THE LAST DATE OF FINANCIAL YEAR AND THE DEDUCTION NEED NOT BE MADE ON THE AMOUNT ALREADY PA ID, IS CONTRARY TO PROVISIONS OF INCOME-TAX ACT WHICH REQU IRES DEDUCTION OF TAX. IF THE CONTENTION OF THE ASSESSEE IS ACCEP TED, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ENTIRE PROVIS IONS OF INCOME- TAX ACT WHICH REQUIRE THE ASSESSEE TO DEDUCT TAX WO ULD BE MEANINGLESS. IN FACT, THIS TRIBUNAL EXAMINED THE I SSUE ELABORATELY IN I.T.A. NOS.336 & 337/MDS/2015 IN SHRI V. PANDARI NATHAN V. ITO DATED 29.05.2015 AND OBSERVED AS FOLLOWS:- 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE FIRST CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE HAD ALREADY PAID ON OR BEFORE 31.03.2010 AND NOTHING REMAINED TO BE PAID. THE LD. REPRESENTATIVE PLACED RELIANCE ON TH E JUDGMENT OF ALLAHABAD HIGH COURT IN VECTOR SHIPPING SERVICES (P) LTD. (SUPRA) AND ON THE DECISION OF TH IS BENCH OF THE TRIBUNAL IN THEEKATHIR PRESS (SUPRA). WE HA VE CAREFULLY GONE THROUGH THE JUDGMENT OF ALLAHABAD HI GH COURT IN VECTOR SHIPPING SERVICES (P) LTD. (SUPRA). THE 8 I.T.A. NOS.2039 & 2041/MDS/15 ALLAHABAD HIGH COURT, WHILE CONSIDERING THE DECISIO N OF THE SPECIAL BENCH OF THIS TRIBUNAL IN MERILYN SHIPPING A ND TRANSPORT (SUPRA), MADE A PASSING REFERENCE ABOUT T HE DECISION TAKEN BY THE SPECIAL BENCH OF THIS TRIBUNAL . THE ALLAHABAD HIGH COURT HAD NO OCCASION TO EXAMINE THE LEGALITY AND OTHERWISE OF THE SPECIAL BENCH OF THIS TRIBUNAL. WE FIND THAT THAT CALCUTTA HIGH COURT IN CIT V. CRE SCENT EXPORT SYNDICATES AND GUJARAT HIGH COURT IN CIT V. SIKANDARKHAN N. TUNVAR HAD AN OCCASION TO EXAMINE TH E LEGALITY OR OTHERWISE OF THE DECISION OF THE SPECIA L BENCH OF THIS TRIBUNAL. THE CALCUTTA HIGH COURT AND THE GUJ ARAT HIGH COURT HAVE EXAMINED THE MATTER IN DETAIL AND FOUND T HAT THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IS NO T SUSTAINABLE IN LAW. HOWEVER, THE ALLAHABAD HIGH CO URT BY WAY OF PASSING REFERENCE DECIDED THE MATTER IN FAVO UR OF THE ASSESSEE. THE SPECIAL LEAVE PETITION FILED BY THE REVENUE AGAINST THE JUDGMENT OF ALLAHABAD HIGH COUR T IN VECTOR SHIPPING SERVICES (P) LTD. (SUPRA) WAS REJEC TED BY THE APEX COURT AT THE ADMISSION STATE. THEREFORE, T HE APEX COURT HAS NOT LAID DOWN ANY LAW. IN OTHER WORD S, MERE DISMISSAL OF THE SPECIAL LEAVE PETITION BY THE APEX COURT AT THE ADMISSION STAGE DOES NOT AMOUNT TO LAYING DOWN ANY LAW ON THE ELABORATE JUDGMENTS ON THE GROUND CALCUTTA H IGH COURT AND GUJARAT HIGH COURT AVAILABLE ON THE SAME SUBJECT. ON IDENTICAL CIRCUMSTANCES, THE COCHIN BENCH OF THIS TRIBUNAL IN THOMAS GEORGE MUTHOOT V. ACIT IN I.T.A. NO.63 & 64/COCH/2014 HAD AN OCCASION TO CONSIDER AN IDENTICAL ISSUE. THE COCHIN BENCH HAS OBSERVED AS FOLLOWS:- 12. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMEN T OF THE ALLAHABAD HIGH COURT IN CIT VS M/S VECTOR SHIPPING SERVICES (P) LTD (SUPRA), COPY OF WHICH IS FILED BY THE ASSE SSEE. THE ALLAHABAD HIGH COURT, AFTER REPRODUCING THE RELEVAN T PARAGRAPH FROM THE ORDER OF CIT(A) AND REFERRING TO THE DECIS ION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN MERILYIN SHIPPING & TRANSPORTS (SUPRA) FOUND THAT THE TRIBUNAL HAS NOT COMMITTED A N ERROR. IT IS OBVIOUS THAT THERE IS NO DISCUSSION ABOUT THE CORRE CTNESS OR OTHERWISE OF THE DECISION RENDERED BY THE SPECIAL B ENCH OF THIS TRIBUNAL IN MERILYN SHIPPING & TRANSPORTS (SUPRA). HOWEVER, WE FIND THAT THE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIKANDARKHAN N TUNVAR ITA NOS 905 OF 2012, 709 & 71 0 OF 2012, 333 OF 2013, 832 OF 2012, 857 OF 2012, 894 OF 2012, 928 9 I.T.A. NOS.2039 & 2041/MDS/15 OF 2012, 12 OF 2013, 51 OF 2013, 58 OF 2013 AND 218 OF 2013 JUDGMENT DATED 02-05-2013 CONSIDERED THE DECISION O F THE SPECIAL BENCH OF THIS TRIBUNAL IN MERILYN SHIPPING & TRANSPORTS (SUPRA) AND SPECIFICALLY DISAGREED WITH THE PRINCIP LES LAID DOWN BY THE SPECIAL OF THIS TRIBUNAL IN MERILYN SHIPPING & TRANSPORTS (SUPRA). THE CALCUTTA HIGH COURT ALSO IN THE CASE O F CRESCENT EXPORTS SYNDICATE & ANOTHER IN ITAT 20 OF 2013 AND GA 190 OF 2013 JUDGMENT DATED 03-04-2013 CONSIDERED ELABORATE LY THE JUDGMENT OF THE SPECIAL BENCH OF THIS TRIBUNAL IN M ERILYN SHIPPING & TRANSPORTS (SUPRA) AND FOUND THAT THE DE CISION RENDERED BY THE SPECIAL BENCH OF THIS TRIBUNAL IS N OT THE CORRECT LAW. IT IS WELL SETTLED PRINCIPLES OF LAW THAT WHEN DIFFERENT HIGH COURTS EXPRESSED DIFFERENT OPINIONS ON A POINT OF L AW, THEN, NORMALLY, THE BENEFIT OF DOUBT UNDER THE TAXATION L AW WOULD GO TO THE ASSESSEE. IT IS ALSO EQUALLY SETTLED PRINCIP LES OF LAW THAT THE JUDGMENT WHICH DISCUSSES THE POINT IN ISSUE ELA BORATELY AND GIVES AN ELABORATE REASONING HAS TO BE PREFERRED WH EN COMPARED TO THE JUDGMENT WHICH HAS NO REASONING AND DISCUSSION. ADMITTEDLY, THE CALCUTTA HIGH COURT AND GUJARAT HIGH COURT HAVE DISCUSSED THE ISSUE ELABORATELY AND THE SPECIFIC REASONING HAS ALSO BEEN RECORDED AS TO WHY THE SPECIAL BENCH IS NOT CORRECT. THEREFORE, THIS TRIBU NAL IS OF THE CONSIDERED OPINION THAT THE JUDGMENTS OF THE CALCUT TA HIGH COURT CRESCENT EXPORTS SYNDICATE & ANOTHER (SUPRA) AND GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR (SUPRA) HAVE TO BE PREFERRED WHEN COMPARED TO THE ALLAHABAD HIGH CO URT IN M/S VECTOR SHIPPING SERVICES (P) LTD (SUPRA). 13. FOR THE PURPOSE OF CONVENIENCE WE REPRODUCING BELOW THE OBSERVATIONS MADE BY THE CALCUTTA HIGH COURT IN CRE SCENT EXPORTS SYNDICATE & ANOTHER (SUPRA) AND GUJARAT HIG H COURT IN SIKANDARKHAN N TUNVAR (SUPRA): CALCUTTA HIGH COURT IN CRESCENT EXPORTS SYNDICATE & ANOTHER (SUPRA) 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. WE ALREADY HAVE QUOTED EXTENSIVELY BOTH THE MAJORITY AND THE MINORITY VIEWS EXPRESSED IN THE AF ORESAID CASE. THE MAIN THRUST OF THE MAJORITY VIEW IS BASED ON THE FACT THAT THE LEGISLATURE HAS REPLACED THE EXPRESS ION AMOUNTS CREDITED OR PAID WITH THE EXPRESSION PAY ABLE IN THE FINAL ENACTMENT. COMPARISON BETWEEN THE PRE-AMENDMENT AND POST AMENDMENT LAW IS PERMISSIBLE FOR THE PURPOSE O F 10 I.T.A. NOS.2039 & 2041/MDS/15 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 CA SE OF CIT VS. KELVINATOR REPORTED IN 2010(2) SCC 723. BUT THE SAME COMPARISON BETWEEN THE DRAFT AND THE ENACTED L AW IS NOT PERMISSIBLE. NOR CAN THE DRAFT OR THE BILL B E USED FOR THE PURPOSE OF REGULATING THE MEANING AND PURPORT O F THE ENACTED LAW. IT IS THE FINALLY ENACTED LAW WHICH IS THE WILL OF THE LEGISLATURE. THE LEARNED TRIBUNAL FELL 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 SECTION ON THE BASIS OF AN Y COMPARISON BETWEEN THE DRAFT AND THE SECTION ACTUAL LY 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) OF THE ACT CREATES A LEGAL FICTION BY VIRTUE OF WHI CH 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 SEE K TO JUSTIFY THAT THIS FICTION CANNOT BE EXTENDED AN Y FURTHER AND, THEREFORE, CANNOT BE INVOKED BY ASSESSING OFFI CER TO DISALLOW THE GENUINE AND REASONABLE EXPENDITURE ON THE AMOUNTS OF EXPENDITURE ALREADY PAID? DOES THIS NOT AMOUNT TO DELIBERATELY READING SOMETHING IN THE LAW WHICH IS NOT THERE? WE, AS SUCH, HAVE NO DOUBT IN OUR MIN D THAT THE LEARNED TRIBUNAL REALIZED THE MEANING AND PURPO RT OF SECTION 40(A)(IA) CORRECTLY WHEN IT HELD THAT IN CA SE OF OMISSION TO DEDUCT TAX EVEN THE GENUINE AND ADMISSI BLE EXPENSES ARE TO BE DISALLOWED. BUT THEY SOUGHT TO R EMOVE THE RIGOUR OF THE LAW BY HOLDING THAT THE DISALLOWA NCE SHALL BE RESTRICTED TO THE MONEY WHICH IS YET TO BE PAID. WHAT THE TRIBUNAL BY MAJORITY DID WAS TO SUPPLY THE CASU S OMISSUS WHICH WAS NOT PERMISSIBLE AND COULD ONLY HA VE BEEN DONE BY THE SUPREME COURT IN AN APPROPRIATE CA SE. REFERENCE IN THIS REGARD MAY BE MADE TO THE JUDGMEN T IN THE CASE OF BHUWALKA STEEL INDUSTRIES VS. BOMBAY IR ON & 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 11 I.T.A. NOS.2039 & 2041/MDS/15 EMPLOYMENT. THE CONTENTION RAISED WITH REFERENCE T O WHAT WAS THERE IN THE BILL WAS REJECTED BY THE SUPR EME COURT BY HOLDING AS FOLLOWS: IT MUST, AT THIS JUNC TURE, BE NOTED THAT IN SPITE OF SECTION 2(11), WHICH INCLUDE D THE WORDS BUT FOR THE PROVISIONS OF THIS ACT IS NOT AD EQUATELY PROTECTED BY LEGISLATION FOR WELFARE AND BENEFITS O F THE LABOUR FORCE IN THE STATE, THESE PRECISE WORDS WER E REMOVED BY THE LEGISLATURE AND THE DEFINITION WAS M ADE LIMITED AS IT HAS BEEN FINALLY LEGISLATED UPON. IT IS TO BE NOTED THAT WHEN THE BILL CAME TO BE PASSED AND RECE IVED THE ASSENT OF THE VICE-PRESIDENT ON 05-06-1969 AND WAS FIRST PUBLISHED IN THE MAHARASHTRA GOVERNMENT GAZET TE EXTRAORDINARY, PART IV ON 13-06-1969, THE AFOREMENT IONED WORDS WERE OMITTED. THEREFORE, T HIS WOULD BE A CLE AR POINTER TO THE LEGISLATIVE INTENT THAT THE LEGISLAT URE BEING CONSCIOUS OF THE FACT AND BEING ARMED WITH ALL THE COMMITTEE REPORTS AND ALSO BEING ARMED WITH THE FAC TUAL DATA, DELIBERATELY AVOIDED THOSE WORDS. WHAT THE APPELLANTS ARE ASKING WAS TO READ IN THAT DEFINITIO N, THESE PRECISE WORDS, WHICH WERE CONSCIOUSLY AND DELIBERAT ELY OMITTED FROM THE DEFINITION. THAT WOULD AMOUNT TO SUPPLYING THE CASUS OMISSUS AND WE DO NOT THINK THA T IT IS POSSIBLE, PARTICULARLY, IN THIS CASE. THE LAW OF SU PPLYING THE CASUS OMISSUS BY THE COURTS IS EXTREMELY CLEAR AND SETTLED THAT THOUGH THIS COURT MAY SUPPLY THE CASUS OMISSUS , IT WOULD BE IN THE RAREST OF THE RATE CASE AND THUS SU PPLYING OF THIS CASUS OMISSUS WOULD BE EXTREMELY NECESSARY DUE TO THE INADVERTENT OMISSION ON THE PART OF THE LEGI SLATURE. 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 QUESTION IS WHICH EX PENSES ARE SOUGHT TO BE DISALLOWED? THE ANSWER IS BOUND T O BE THOSE EXPENSES ON WHICH TAX IS DEDUCTIBLE AT SOURC E 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 AM OUNT IS PAYABLE, IT CAN NEITHER BE PAID NOR CREDITED. IF 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 SUSCEPTIBLE TO GIVING MORE THAN ONE MEANING. BY LOO KING AT THE DRAFT IT COULD BE SAID THAT THE LEGISLATURE WANTED TO TREAT THE PAYMENTS MADE OR CREDITED IN FAVOUR OF A CONTRACTOR OF SUBCONTRACTOR DIFFERENTLY THAN THE PA YMENTS ON ACCOUNT OF INTEREST, COMMISSION OR BROKERAGE, FE ES FOR 12 I.T.A. NOS.2039 & 2041/MDS/15 PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S BECAUSE THE WORDS MOUNTS CREDITED OR PAID WERE US ED ONLY IN RELATION TO A CONTRACTOR OF SUB-CONTRACTOR. THIS DIFFERENTIAL TREATMENT WAS NOT INTENDED. THEREFORE, THE LEGISLATURE PROVIDED THAT THE AMOUNTS, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER XVII-B PAYABLE ON ACCOUN T OF INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, F EES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S OR TO A CONTRACTOR OF SUB-CONTRACTOR SHALL NOT BE DEDUCTED IN COM PUTTING THE INCOME OF AN ASSESSEE IN CASE HE HAS NO T DEDUCTED, OR AFTER DEDUCTION HAS NOT PAID WITHIN TH E SPECIFIED TIME. THE LANGUAGE USED BY THE LEGISLATUR E IN THE FINALLY ENACTED LAW IS CLEAR AND UNAMBIGUOUS WHEREA S 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. THER E 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 AN SWER TO THE SUBMISSION OF MR. BAGCHI. THE SUBMISSION OF MR. ROYCHOWDHURI THAT THE SECOND PROVISO SOUGHT TO BECO ME EFFECTIVE FROM 1ST APRIL, 2013 SHOULD BE HELD TO HA VE ALREADY BECOME OPERATIVE PRIOR TO THE APPOINTED DAT E CANNOT ALSO BE ACCEDED TO FOR THE SAME REASON INDIC ATED ABOVE. THE LAW WAS DELIBERATELY MADE HARSH TO SECUR E COMPLIANCE OF THE PROVISIONS REQUIRING DEDUCTIONS O F TAX AT SOURCE. IT IS NOT THE CASE OF AN INADVERTENT ERROR. FOR THE REASONS DISCUSSED ABOVE, WE ARE OF THE OPINION THAT THE MAJORITY VIEWS EXPRESSED IN THE CA SE OF MERILYN SHIPPING & TRANSPORTS ARE NOT ACCEPTABLE. T HE SUBMISSIONS ADVANCED BY LEARNED ADVOCATES HAVE ALRE ADY BEEN DEALT WITH AND REJECTED. GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR(SUPRA ) 23. DESPITE THIS NARROW INTERPRETATION OF SECTION 40(A)(IA), THE QUESTION STILL SURVIVES IF THE TRIBUNAL IN CASE OF M/S MERILYN SHIPPING & TRANSPORS VS. ACIT (SUPRA) WAS ACCURATE IN ITS OPINION. IN THIS CONTEXT, WE WOULD LIKE TO EXAMINE TWO ASPECTS. FIRSTLY, WHAT WOULD BE THE COR RECT INTERPRETATION OF THE SAID PROVISION. SECONDLY, WHE THER OUR SUCH UNDERSTANDING OF THE LANGUAGE USED BY THE LEGISLATURE SHOULD WAVER ON THE PREMISE THAT AS PROPOUNDED BY THE TRIBUNAL, THIS WAS A CASE OF CONS CIOUS OMISSION ON THE PART OF THE PARLIAMENT. BOTH THESE ASPECTS WE WOULD ADDRESS ONE AFTER ANOTHER. IF ONE LOOKS CL OSELY TO THE PROVISION, IN QUESTION, ADVERSE CONSEQUENCES OF NOT BEING ABLE TO CLAIM DEDUCTION ON CERTAIN PAYMENTS 13 I.T.A. NOS.2039 & 2041/MDS/15 IRRESPECTIVE OF THE PROVISIONS CONTAINED IN SECTION S 30 TO 38 OF THE ACT WOULD FLOW IF THE FOLLOWING REQUIREME NTS ARE SATISFIED:- (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 XVIII-B. (C) SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTI ON HAS NOT BEEN PAID ON OR BEFORE DUE DATE SPECIFIED IN SU B- SECTION (1) OF SECTION 39. FOR THE PURPOSE OF CURRENT DISCUSSION REFERENCE T O 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 WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B BUT SUCH TAX HAS NOT BEEN DEDU CTED OR IF DEDUCTED NOT PAID BEFORE THE DUE DATE. THIS P ROVISION NOWHERE REQUIRES THAT THE AMOUNT WHICH IS PAYABLE M UST REMAIN SO PAYABLE THROUGHOUT DURING THE YEAR. TO RE ITERATE THE PROVISION HAS CERTAIN STRICT AND STRINGENT REQU IREMENTS BEFORE THE UNPLEASANT CONSEQUENCES ENVISAGED THEREI N CAN BE APPLIED. WE ARE PREPARED TO AND WE ARE DUTY BOUND TO INTERPRET SUCH REQUIREMENTS STRICTLY. SUCH REQUIREMENTS, HOWEVER, CANNOT BE ENLARGED 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 OR SUB-CONTRACTOR FOR CARRY ING OUT ANY WORK. THE LANGUAGE USED IS NOT THAT SUCH AMOUNT MUST CONTINUE TO REMAIN PAYABLE TILL THE END OF THE ACCOUNTING YEAR. ANY SUCH INTERPRETATION WOULD REQU IRE READING WORDS WHICH THE LEGISLATURE HAS NOT USED. N O SUCH INTERPRETATION WOULD EVEN OTHERWISE BE JUSTIFIED BE CAUSE IN OUR OPINION, THE LEGISLATURE COULD NOT HAVE INTENDE D TO BRING ABOUT ANY SUCH DISTINCTION NOR THE LANGUAGE U SED IN THE SECTION BRINGS ABOUT ANY SUCH MEANING. IF THE INTERPRETATION S ADVANCED BY THE ASSESSEES IS ACCEP TED, IT WOULD LEAD TO A SITUATION WHERE THE ASSESSEE THOUGH WAS REQUIRED TO DEDUCT THE TAX AT SOURCE BUT NO SUCH DE DUCTION WAS MADE OR MORE FLAGRANTLY DEDUCTION THOUGH MADE I S NOT PAID TO THE GOVERNMENT, WOULD ESCAPE THE CONSEQUENCE ONLY BECAUSE THE AMOUNT WAS ALREADY PAI D OVER BEFORE THE END OF THE YEAR IN CONTRAST TO ANOT HER ASSESSEE WHO WOULD OTHERWISE BE IN SIMILAR SITUATIO N BUT 14 I.T.A. NOS.2039 & 2041/MDS/15 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 CONSEQUENCES. WE HASTEN TO ADD THAT THIS IS NOT THE PRIME BASIS ON WHICH WE HA VE ADOPTED THE INTERPRETATION WHICH WE HAVE GIVEN. IF THE LANGUAGE USED BY THE PARLIAMENT CONVEYED SUCH A MEANING, WE WOULD NOT HAVE HESITATED IN ADOPTING SU CH AN INTERPRETATION. WE ONLY HIGHLIGHT THT WE WOULD NOT READILY ACCEPT THAT THE LEGISLATURE DESIRED TO BRING ABOUT AN INCONGRUOUS AND SEEMINGLY IRRECONCILABLE CONSEQUENC ES. THE DECISION OF HE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX, GUJARAT VS. ASHOKBHAI CHIMANBHAI (SUPRA), WOULD NO6T 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 NOWHERE INDICA TES THAT THE EVENTS WHICH TAKE PLACE DURING THE ACCOUNT ING PERIOD SHOULD BE IGNORED AND THE ASCERTAINMENT OF F ULFILLING A CERTAIN CONDITION PROVIDED UNDER THE STATUTE MUST BE JUDGED WITH REFERENCE TO LAST DATE OF THE ACCOUNTIN G PERIOD. PARTICULARLY, IN THE CONTEXT OF REQUIREMENTS F SECT ION 40(A)(IA) OF THE ACT, WE SEE NO WARRANT IN THE SAID DECISION OF THE SUPREME COURT TO APPLY THE TEST OF PAYABILIT Y ONLY AS ON 31ST MARCH OF THE YEAR UNDER CONSIDERATION. MERE LY BECAUSE, ACCOUNTS ARE CLOSED ON THAT DATE AND THE COMPUTATION OF PROFIT AND LOSS IS TO BE JUDGED WITH REFERENCE TO SUCH DATE, DOES NOT MEAN THAT WHETHER AN AMOUNT IS PAYABLE OR NOT MUST BE ASCERTAINED ON THE STRENGTH OF THE POSITION EMERGING ON 31T MARCH. 25. THIS BRINGS US TO THE SECOND ASPECT OF THIS DIS CUSSION, NAMELY, WHETHER THIS IS A CASE OF CONSCIOUS OMISSIO N AND THEREFORE, THE LEGISLATURE MUST BE SEEN TO HAVE DELIBERATELY BROUGHT ABOUT A CERTAIN SITUATION WHIC H DOES NOT REQUIRE ANY FURTHER INTERPRETATION. THIS IS THE FUNDAMENTAL ARGUMENT OF THE TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) TO A DOPT A PARTICULAR VIEW. 26. WHILE INTERPRETING A STATUTORY PROVISION THE CO URTS HAVE OFTEN APPLIED HYDENS RULE OR THE MISCHIEF RUL E AND ASCERTAINED WHAT WAS THE POSITION BEFORE THE AMENDM ENT, WHAT THE AMENDMENT SOUGHT TO REMEDY AND WHAT WAS TH E EFFECT OF THE CHANGES. 27 TO 36.. 15 I.T.A. NOS.2039 & 2041/MDS/15 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 LEGISLAT ION WHICH MAY BE PASSED. SECONDLY, THE STATUTORY PROVIS IONS IS AMPLY CLEAR. 38. IN THE RESULT, W ARE OF THE OPINION THAT SECTIO N 40(A)(IA) WOULD COVER NOT ONLY TO THE AMOUNTS WHICH ARE PAYAB LE AS ON 20 ITA NO. 63&64M 83-85&7-72/COCH/2014 31ST MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYAB LE AT ANY TIME DURING THE YEAR. OF COURSE, AS LONG AS THE OTHER REQUIREMENT OF THE SAID PROVISION EXIST. IN THAT CO NTEXT, IN OUR OPINION THE DECISION OF THE SPECIAL BENCH OF TH E TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPING & TRAN SPORTS VS ACIT (SUPRA), DOES NOT LAY DOWN CORRECT LAW. 14. BY FOLLOWING THE JUDGMENTS OF THE CALCUTTA HIG H COURT IN CRESCENT EXPORT SYNDICATE (SUPRA) AND THE GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR (SUPRA), THIS TRIBUN AL IS OF THE CONSIDERED OPINION THAT THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPING & TRANSPORTS (SUPRA) AND THE JUDGMENT OF THE ALLAHABAD HIGH COUR T IN VECTOR SHIPPING SERVICES (P) LTD (SUPRA) ARE NOT APPLICABL E TO THE FACTS OF THE CASE UNDER CONSIDERATION WHEREAS THE JUDGMEN TS OF THE CALCUTTA HIGH COURT IN CRESCENT EXPORT SYNDICATE (S UPRA) AND THE GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR (SU PRA) ARE SQUARELY APPLICABLE TO THE FACTS OF THE CASE. RESPE CTFULLY FOLLOWING THE JUDGMENTS OF THE CALCUTTA HIGH COURT IN CRESCENT EXPORT SYNDICATE (SUPRA) AND THE GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR (SUPRA), WE DO NOT SEE ANY IN FIRMITY IN THE ORDERS OF THE LOWER AUTHORITIES. ACCORDINGLY, T HE ORDERS OF THE LOWER AUTHORITIES ARE CONFIRMED. 12. ONE OF US, THE JUDICIAL MEMBER IS A PARTY TO TH E ABOVE ORDER OF THE COCHIN BENCH OF THIS TRIBUNAL. I N FACT, THE ASSESSEE BEFORE THE COCHIN BENCH FILED A MISCELL ANEOUS PETITION ON THE GROUND THAT THERE IS AN ERROR IN TH E ORDER OF THIS TRIBUNAL. THE COCHIN BENCH REJECTED THE MISCEL LANEOUS PETITION FILED BY THE ASSESSEE. THE ASSESSEE CHALL ENGED THE CORRECTNESS OF THE ORDER PASSED BY THE COCHIN BENCH ON THE MISCELLANEOUS PETITION BY WAY OF WRIT PETITION BEFO RE THE KERALA HIGH COURT. THE KERALA HIGH COURT, HOWEVER, DISMISSED THE WRIT PETITION FILED BY THE ASSESSEE. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED O PINION THAT THE JUDGMENTS OF CALCUTTA HIGH COURT AND GUJAR AT HIGH 16 I.T.A. NOS.2039 & 2041/MDS/15 COURT HAVE TO BE PREFERRED RATHER THAN THE JUDGMENT OF ALLAHABAD HIGH COURT. IN OTHER WORDS, THE JUDGMENT OF ALLAHABAD HIGH COURT DOES NOT CONTAIN ANY REASONING , THEREFORE, IT HAS TO BE TREATED AS PER INCURIAM . BY RESPECTFULLY FOLLOWING THE JUDGMENTS OF CALCUTTA HI GH COURT IN CRESCENT EXPORT SYNDICATES (SUPRA) AND GUJARAT HI GH COURT IN SIKANDARKHAN N. TUNVAR (SUPRA) FOR THE REA SONS STATED THEREIN, WE UPHOLD THE ORDER OF THE CIT(APPE ALS). THE ASSESSEE BEFORE THE COCHIN BENCH OF THE TRIBUNA L IN THOMAS GEORGE MUTHOOT (SUPRA) FILED APPEAL BEFORE T HE HIGH COURT OF KERALA. THE HIGH COURT OF KERALA IN THOMA S GEORGE MUTHOOT V. CIT IN ITA NO.278 OF 2014 DATED 3.7.201 5, WHILE CONFIRMING THE ORDER OF THE COCHIN BENCH, OBSERVED AS FOLLOWS:- 17. ANOTHER CONTENTION THAT WAS PRESSED INTO SERVICE WAS THAT THE APPELLANTS HAD ALREADY PAID THE AMOUNT AND THEREFORE, THE PROVISIONS OF SECTION 40(A)(IA), APPL ICABLE ONLY IN RESPECT OF THE AMOUNT WHICH REMAINS TO BE P AYABLE ON THE LAST DAY OF THE FINANCIAL YEAR, IS NOT ATTRA CTED. THEREFORE, ACCORDING TO THE APPELLANTS, DISALLOWANC E CANNOT BE SUSTAINED. THIS CONTENTION WAS SOUGHT TO BE SUBSTANTIATED BY RELYING ON THE JUDGMENT OF THE ALL AHABAD HIGH COURT IN COMMISSIONER OF INCOME TAX V. VECTOR SHIPPING SERVICES (P) [2013] 357 ITR 642 (ALL)]. PRIMARILY, THIS CONTENTION SHOULD BE ANSWERED WITH REFERENCE T O THE LANGUAGE USED IN THE STATUTORY PROVISION. SECTION 40(A)(IA) MAKES IT CLEAR THAT THE CONSEQUENCE OF DISALLOWANCE IS ATTRACTED WHEN AN INDIVIDUAL, WHO IS LIABLE TO DEDU CT TAX ON ANY INTEREST PAYABLE TO A RESIDENT ON WHICH TAX IS D EDUCTIBLE AT SOURCE, COMMITS DEFAULT. THE LANGUAGE OF THE SE CTION DOES NOT WARRANT AN INTERPRETATION THAT IT IS ATTRA CTED ONLY IF HE IN REMAINS PAYABLE ON THE LAST DAY OF THE FIN ANCIAL YEAR. IF THIS CONTENTION IS TO BE ACCEPTED, THIS COURT WI LL HAVE TO ALTER THE LANGUAGE OF SECTION 40(A)(IA) AND SUCH AN INTERPRETATION IS NOT PERMISSIBLE. THIS VIEW THAT WE HAVE TAKEN IS SUPPORTED BY JUDGMENTS OF THE CALCUTTA HIG H COURT IN CRESCENT EXPORTS SYNDICATE AND ANOTHER [ITAT 20 OF 2013] AND THE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V. SIKANDADARKHAN N. TUNV AR 17 I.T.A. NOS.2039 & 2041/MDS/15 [ITA NOS.905 OF 2012 & CONNECTED CASES], WHICH HAVE BEEN RELIED ON BY THE TRIBUNAL. 5. IN VIEW OF THE ABOVE DECISION OF THIS BENCH OF T HE TRIBUNAL, THE ORDER OF THE CIT(APPEALS) ALLOWING TH E CLAIM OF THE ASSESSEE IS NOT JUSTIFIED. ACCORDINGLY, THE ORDER OF THE CIT(APPEALS) IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 13. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE JUDGMENT OF ALLAHABAD HIGH COURT I N VECTOR SHIPPING SERVICES (P) LTD. (SUPRA) IS NOT APPLICABL E TO THE FACTS OF THE CASE. BY RESPECTFULLY FOLLOWING THE JUDGMENTS OF CALCUTTA HIGH COURT, GUJARAT HIGH COURT AND KERALA HIGH COURT IN THOMAS GEORGE MUTHOOT (SUPRA), THE ORDER OF THE CIT(APPEALS) IS S ET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 14. IN THE RESULT, THE ASSESSEES APPEAL IN I.T.A. NO.2039/MDS/2015 IS DISMISSED. HOWEVER, THE REVENU ES APPEAL IN I.T.A. NO.2041/MDS/2015 IS PARTLY ALLOWED. ORDER PRONOUNCED ON 18 TH MARCH, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 7 /DATED, THE 18 TH MARCH, 2016. KRI. 18 I.T.A. NOS.2039 & 2041/MDS/15 1 -089 :9)0 /COPY TO: 1. (/0 /ASSESSEE 2. ASSESSING OFFICER 3. 4 ;0 () /CIT(A)-18, CHENNAI 4. PRINCIPAL CIT, CENTRAL-I, CHENNAI 5. 9< -0 /DR 6. =( > /GF.
