M/s. B. P. Jain, Dhule V. Income-tax Officer,

ITA 2149/PUN/2013

• Counselvise Citation: 214924514 RSA 2013
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-02-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 11-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Business income; Period of limitation; Deemed to accrue or arise in india; Non-deduction of tax; Reasonable cause
• Section: 43B; 234B; 194C; 145; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER. ITA.NO.2149/PN/2013 (ASSTT. YEAR : 2010-11) M/S. B.P. JAIN, NEAR GURUDWARA, MALEGAON ROAD, DHULE-424 001 .. APPELLANT PAN NO.AABFB7357E VS. ITO, WARD-3(1), DHULE .. RESPONDENT ASSESSEE BY : NONE RESPONDENT BY : SHRI B.C. MALAKAR DATE OF HEARING : 10-02-2015 DATE OF PRONOUNCEMENT : 18-02-2015 ORDER PER G.S. PANNU, AM : THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER O F THE CIT(A)-I, NASHIK DATED 14-11-2013 WHICH IN TURN HAS ARISEN FR OM THE ORDER PASSED BY THE ASSESSING OFFICER U/S.143(3) OF THE ACT DATE D 25-01-2013 PERTAINING TO A.Y. 2010-11. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1) ON THE FACTS AND IN LAW THE ID. CIT(A) HAS ERR ED IN CONFIRMING ADDITION OF RS. 6,23,861/- U/S.40(A)(IA) OF THE ACT . 2) ON THE FACTS AND IN LAW THE ID. C1T(A) HAS ERRE D IN NOT APPRECIATING THE FACT THAT THE HON'BLE ALLAHABAD HI GH COURT IN THE LATER DECISION IN THE CASE OF CIT VS. M/S. VECTOR SHIPPIN G SERVICES PVT. LTD. DATED 9/7/2013 HAS HELD THAT THE EXPENDITURE, WHICH IS NOT PAYABLE AT THE YEAR END, AS THE SAME HAS BEEN PAID DURING THE YEAR , CANNOT BE DISALLOWED U/S.40(A)(IA) OF THE ACT. 3) ON THE FACTS AND IN LAW THE ID. CIT(A) HAS ERRE D IN NOT APPRECIATING THE ESTABLISHED LAW THAT WHEN THERE AR E DECISIONS OF SOME HIGH COURTS OTHER THAN JURISDICTIONAL HIGH COURTS, IN FAVOUR OF THE ASSESSEE AND AGAINST THE ASSESSEE, THEN THE DECISIO N OF THE COURT IN FAVOUR OF THE ASSESSEE SHOULD BE FOLLOWED. 4) ON THE FACTS AND IN LAW THE ID. CIT(A) HAS ERRE D IN IGNORING THE LEGAL PROPOSITION MENTIONED IN GROUND NO.3 ABOVE BY IGNORING THE FOLLOWING DECISIONS OF HON'BLE SUPREME COURT, POINT ED OUT TO HIM IN SUBMISSION;- 2 I. CIT VS. VEGETABLE PRODUCTS LTD. (1973) 88 ITR 1 92 (SC) II. CIT VS. SHAAN FINANCE P. LTD. (1998) 231 ITR 3 08. III) CIT VS. PODAR CEMENT (P) LTD. ETC (1997) 141 CTR 67 (SC) YOUR APPELLANT CRAVES LEAVE, ADD, ALTER, DELETE ABO VE OR ANY OTHER GROUND/S OF APPEAL. 2. AT THE TIME OF HEARING, IT WAS NOTICED THAT NONE APPEARED ON BEHALF OF THE ASSESSEE IN RESPECT OF SERVICE OF NOTICE OF THE HEARING BY THE REGISTERED AD AND THEREFORE WE HAVE PROCEEDED TO HE AR THE APPEAL EXPARTE QUA THE ASSESSEE APPELLANT AND AFTER HEARIN G THE LD. DEPARTMENTAL REPRESENTATIVE ON MERITS. 3. THE ONLY DISPUTE IN THE APPEAL IS WITH REGARD TO DISALLOWANCE OF EXPENDITURE ON HIRING OF TANKER OF RS.6,20,861/- BY INVOKING SECTION 40(A(IA) OF THE ACT ON THE GROUND THAT ASSESSEE HAD FAILED TO DEDUCT THE TDS IN RESPECT OF SUCH PAYMENT. THE CIT(A) HAS SUS TAINED THE ADDITION BY MAKING THE FOLLOWING DISCUSSION : 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOT ICED THAT DURING THE YEAR UNDER APPEAL THE APPELLANT HAS NOT DEDUCTED TD S IN RESPECT OF PAYMENT MADE TO SHRI DILIP V. JAGTAP TOWARDS HIRING OF TANKERS AMOUNTING TO RS.6,23,861/-. THE APPELLANT WAS LIABLE TO DEDUC T TAX UNDER CHAPTER XVII-B OF THE I.T. ACT, 1961. THE APPELLANT HAS CLA IMED THAT AS THE AMOUNT HAS BEEN PAID DURING THE YEAR UNDER APPEAL AND IS N OT OUTSTANDING AT THE YEAR END, THE SAME CANNOT BE DISALLOWED U/S 40(A)(I A) OF THE ACT. IN SUPPORT OF THE ABOVE CONTENTION, THE APPELLANT HAS RELIED ON THE DECISIONS OF VARIOUS TRIBUNALS AND ALSO THE DECISION OF HON'B LE ALLAHABAD HIGH COURT IN THE CASE OF CIT, MUZAFFARNAGAR VS. M/S VECTOR SH IPPING SERVICES (P) LTD., MUZAFFARNAGAR, BEARING I.T.A. NO.122 OF 2013 DATED 09/07/2013. AS REGARDS APPELLANT'S RELIANCE ON THE HON'BLE HIGH CO URT, ALLAHABAD, I FIND THAT VARIOUS OTHER HON'BLE HIGH COURTS HAVE HELD TH AT EVEN IF THE AMOUNT OF EXPENDITURE HAS BEEN PAID DURING THE YEAR UNDER CONSIDERATION, THE SAME IS LIABLE FOR DISALLOWANCE U/S 40(A)(IA) OF TH E ACT IF NO TDS HAS BEEN DEDUCTED. IN THE CASES OF CIT VS. CRESCENT EXPORT S YNDICATE, I.T.A. NO.20 OF 2013, G.A. NO.190 OF 2013 (CAL. H.C) AND CIT VS. MD. JAKIR HOSSAIN MONDAL, I.T.A. NO.31 OF 2013, G.A. NO.320 OF 2013 ( CAL. H.C.) DATED 4 TH APRIL, 2013, THE HON'BLE KOLKATA HIGH COURT DID NOT ACCEPT THE DECISION OF ITAT (SB) IN THE CASE OF MERILYN SHIPPING AND THERE FORE REMANDED THE ISSUE BACK TO THE HON'BLE ITAT FOR DENOVO DECISION. IN THE CASE OF CIT VS. SIKANDARKHAN N. TUNVAR, T.A. NOS. 905/709/710 ETC. OF2012&2013 DATED 02/05/2013 THE HON'BLE GUJARAT HIGH COURT OBSERVED THAT THE 'MERILYN SHIPPING' DOES NOT LAY DOWN CORRECT LAW. THE HON'BL E COURT HAS HELD THAT 'THE CORRECT LAW IS THAT SEC. 40(A)(IA) COVERS NOT ONLY TO THE AMOUNTS WHICH ARE PAYABLE AS ON 31 ST MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR'. IT HAS BEEN F URTHER NOTICED THAT THE DECISIONS OF ABOVE MENTIONED HIGH COURTS ARE DETAIL ED ONE IN WHICH THEY HAVE DISCUSSED THE ISSUE OF PAID AND PAYABLE IN REF ERENCE TO THE PROVISIONS OF SEC. 40(A)(IA) IN GREAT DETAIL. THE H ON'BLE HIGH COURT OF ALLAHABAD HAS HOWEVER, NOT CONSIDERED THE DETAILED DECISIONS OF THE ABOVE MENTIONED HIGH COURTS. IN VIEW OF THE ABOVE F ACTS AND FOLLOWING THE DECISIONS OF THE ABOVE HON'BLE HIGH COURTS, I A M OF THE CONSIDERED 3 VIEW THAT THE AO IS JUSTIFIED IN DISALLOWING THE PA YMENTS MADE FOR HIRING TANKERS FOR NON DEDUCTION OF TDS U/S 40(A)(IA) OF T HE ACT. THE ADDITION OF RS. 6,23,861/- IS CONFIRMED. GROUND NO.3 IS DISMISS ED. 4. BEFORE US, THERE IS NO MATERIAL TO DISTRACT FROM THE CONCLUSION DRAWN BY THE CIT(A) WHICH IS BASED ON THE ANALYSIS OF THE LEGAL POSITION ON THE SUBJECT. MOREOVER, THE LD. DEPARTMENTAL REPRESENTA TIVE POINTED OUT THAT SIMILAR ISSUE HAS BEEN DEALT WITH BY OUR COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF VINAY ASHWINIKUMAR JONEJA VS. ITO V IDE ITA NO.1514/PN/2012 RELATING TO ASSESSMENT YEAR 2006-07 ORDER DATED 22-10- 2013. THE RELEVANT DISCUSSION IN THE ORDER OF THE TRIBUNAL IS AS UNDER : 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DIS PUTE TO THE FACT THAT THE ASSESSING OFFICER IN THE BODY OF THE ASSESSMENT ORD ER DISALLOWED AN AMOUNT OF RS.7,20,252/- U/S.40(A)(IA) FOR NON DEDUC TION OF TAX. WE FIND THE LD.CIT(A) DISTINGUISHING VARIOUS DECISIONS CITE D BEFORE HIM UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. IT IS THE CASE OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN VIEW OF THE DECISI ON OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF M/S. VECTOR SHIPPING SERV ICE PVT. LTD. (SUPRA) NO DISALLOWANCE U/S.40(A)(IA) CAN BE MADE SINCE NO AMOUNT WAS PAYABLE AT THE END OF THE YEAR. 8.1 WE FIND THE HONBLE HIGH COURT WHILE DECIDING T HE ISSUE HAS RELIED ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNA L IN THE CASE OF MERILYN SHIPPING AND TRANSPORT LTD. REPORTED IN 136 ITD 23 (SC). WE FIND THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF MERILYN SHIPPING AND TRANSPORT LTD. (SUPRA) WAS REVERSED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT S YNDICATE VIDE ORDER DATED 03-04-2013 REPORTED IN TIOL-404-HC-KOL. THE RELEVANT OBSERVATION OF THE HONBLE HIGH COURT READ AS UNDER : WE REQUESTED MR. KHAITAN, LEARNED SENIOR ADVOCATE TO ASSIST THE COURT IN RESOLVING THE ISSUE. THE MATTER WAS DIRECTED TO BE LISTED FOR FURTHER HEARING ON 1ST APRIL, 2013. DICTATED ON 3RD APRIL 2013 MR. KHAITAN, LEARNED SENIOR COUNSEL, SUBMITTED THAT THE VIEWS EXPRESSED BY THE ACCOUNTANT MEMBER ARE PREFERABLE TO THE VIEW S EXPRESSED BY THE JUDICIAL MEMBERS. THE ACCOUNTANT MEMBER IN THE CASE OF MERILYN SHIPPING & TRANSPORTS HAD EXPRESSED THE FOLLOWING V IEWS : 12.2. THE QUESTION FOR CONSIDERATION IS AS TO WHY THE WOR DS 'CREDITED' OR 'PAID' CONTEMPLATED IN THE BILL WERE DROPPED WHILE INCORPORATING SECTION 40(A)(IA). ALL THE AMOUNTS WH ETHER 'CREDITED' OR 'PAID' COME WITHIN THE AMBIT OF TERM 'PAYABLE' A ND, THEREFORE, THE TWO TERMS, VIZ. 'CREDITED' OR 'PAID' WERE ONLY SUPE RFLUOUS AND, THEREFORE, WERE DROPPED IN THE SECTION 40(A)(IA) IN SERTED IN THE ACT. IN THE PROVISIONS RELATING TO TDS, THE RELEVAN CE OF THESE TERMS WAS WITH REFERENCE TO TIMING OF DEDUCTION BUT WHILE MAKING DISALLOWANCE UNDER SECTION 40(A)(IA), THESE TERMS H AD NO RELEVANCE AND, THEREFORE, LEGISLATURE DROPPED THESE TWO TERMS, VIZ. 4 'PAID' OR 'CREDITED' BEFORE INSERTION OF SECTION 40 (A)(IA) IN THE STATUTE. 12.3. IT IS NOTICEABLE THAT SECTION 40(A) IS APPLICABLE IRRESPECTIVE OF THE METHOD OF ACCOUNTING FOLLOWED B Y AN ASSESSEE. THEREFORE, BY USING THE TERM 'PAYABLE' LE GISLATURE INCLUDED THE ENTIRE ACCRUED LIABILITY. IF ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THEN THE MOMENT AMOUNT WAS CREDITED TO THE ACCOUNT OF PAYEE ON ACCR UAL OF LIABILITY, TDS WAS REQUIRED TO BE MADE BUT IF ASSES SEE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING, THEN ON MAKING PAYMENT TDS WAS TO BE MADE AS THE LIABILITY WAS DIS CHARGED BY MAKING PAYMENT. THE TDS PROVISIONS ARE APPLICABL E BOTH IN THE SITUATION OF ACTUAL PAYMENT AS WELL OF THE C REDIT OF THE AMOUNT. IT BECOMES VERY CLEAR FROM THE FACT THAT TH E PHRASE, 'ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B', WAS NOT THERE IN THE BILL BUT INCORPORATED IN THE A CT. THIS WAS NOT WITHOUT ANY PURPOSE. 12.4 IN OUR CONSIDERED OPINION, THERE IS NO AMBIGUITY IN THE SECTION AND TERM 'PAYABLE' CANNOT BE ASCRIBED NARRO W INTERPRETATION AS CONTENDED BY ASSESSEE. HAD THE IN TENTIONS OF THE LEGISLATURE WERE TO DISALLOW ONLY ITEMS OUTS TANDING AS ON 31ST MARCH, THEN THE TERM 'PAYABLE' WOULD HAVE B EEN QUALIFIED BY THE PHRASE AS OUTSTANDING ON 31ST MARC H. HOWEVER, NO SUCH QUALIFICATION IS THERE IN THE SECT ION AND, THEREFORE, THE SAME CANNOT BE READ INTO THE SECTION AS CONTENDED BY THE ASSESSEE. 13. SECTION 40(A)(IA) IS TO BE INTERPRETED HARMONIOUSLY WITH THE TDS PROVISION AS ITS OPERATION SOLELY DEPENDS O N THE PROVISIONS CONTAINED UNDER CHAPTER XVII-B. IT CONTE MPLATES ONE OF THE CONSEQUENCES OF NON-DEDUCTION OF TAX AND ,THEREFORE, HAS TO BE INTERPRETED IN THE LIGHT OF M ANDATORY PROVISIONS CONTAINED UNDER CHAPTER XVII-B. IT WOULD BE APPROPRIATE TO REPRODUCE SECTION 40(A)(IA), WHICH R EADS AS UNDER:- SECTION 40(A)(IA):- ANY INTEREST, COMMISSION OR BRO KERAGE, [RENT, ROYALTY,] FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNT S PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYI NG OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER C HAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, [HAS NOT BEEN PAID,- (A) IN A CASE WHERE THE TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR , ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139; OR (B) IN ANY OTHER CASE, ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEAR:] [ PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED (A) DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE SAID DUE DATE; OR (B) DURING ANY OTHER MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE END OF THE SAID PREVIOUS YEAR, SUCH SUM SHALL B E ALLOWED 5 AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVI OUS YEAR IN WHICH SUCH TAX HAS BEEN PAID.] EXPLANATION:-FOR THE PURPOSES OF THIS SUB-CLAUSE,- (I) COMMISSION OR BROKERAGE SHALL HAVE THE SAME M EANING AS IN CLAUSE (I) OF THE EXPLANATION TO SECTION 194 H; (II) FEES FOR TECHNICAL SERVICES SHALL HAVE THE S AME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (I) OF SECTION 9; (III) PROFESSIONAL SERVICES SHALL HAVE THE SAME M EANING AS IN CLAUSE (A)OF THE EXPLANATION TO SECTION 194J; (IV) WORK SHALL HAVE THE SAME MEANING AS IN EXPLA NATION III TO SECTION194C; [(V) RENT SHALL HAVE THE SAME MEANING AS IN CLAUS E (I) TO THE EXPLANATION TO SECTION 194-I; (V) ROYALTY SHALL HAVE THE SAME MEANING AS IN EXP LANATION 2 TO CLAUSE (VI) OF SUB- SECTION (I) OF SECTION 9;] SECTION 40 CONTAINED IN CHAPTER IV DEALS WITH COMPU TATION OF BUSINESS INCOME AND LISTS OUT VARIOUS AMOUNTS WHICH ARE NOT DEDUCTIBLE NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 30 TO 38. THIS IMPLIES THAT EVEN IF A PART ICULAR AMOUNT IS ALLOWABLE UNDER SECTIONS 30 TO 38 STILL, IF IT DOES NOT COMPLY THE PROVISIONS CONTAINED IN SECTION 40, THEN THE SAME CANNOT BE ALLOWED. THE BASIC INGREDIENTS OF SECTION 40(A)(IA) ARE AS U NDER:- (I) IT APPLIES TO INTEREST, COMMISSION OR BROKERAGE , RENT, ROYALTY, FEES FORPROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES; (II) THE AFOREMENTIONED AMOUNTS ARE PAYABLE TO A RE SIDENT, (III) THE AMOUNTS ARE PAYABLE TO A CONTRACTOR OR SU B- CONTRACTOR BEING RESIDENT. (IV) TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII -B IN RESPECT OF AMOUNTS PAYABLE IN RESPECT OF A AFOREMEN TIONED ITEMS. (V) TAX HAS NOT BEEN DEDUCTED AS PER REQUIREMENT OF CHAPTER XVII-B. (VI) AFTER DEDUCTION OF TAX, AMOUNT HAS NOT BEEN PA ID. THEREFORE, IF AFOREMENTIONED CONDITIONS ARE NOT FUL FILLED THEN DEDUCTION WOULD NOT BE ALLOWED. HOWEVER, PROVISO TO THIS SECTION FURTHER GIVES LEVE RAGE TO ASSESSEE TO DEDUCT TAX IN SUBSEQUENT YEAR OR PAY TA X DEDUCTED DURING THE PREVIOUS YEAR AFTER THE DUE DAT E SPECIFIED IN SECTION 139(1). IN SUCH A SITUATION, D EDUCTION WOULD BE ALLOWED IN THE YEAR IN WHICH SUCH TAX HAS BEEN DEDUCTED. THE EXPLANATION TO THIS SECTION DEFINES V ARIOUS AMOUNTS CONTEMPLATED IN THIS SECTION. THE RELEVANT SECTIONS IN CHAPTER XVII-B ARE RE-PRODUCED HEREUNDER:- INTEREST ON SECURITIES. 193. THE PERSON RESPONSIBLE FOR PAYING [TO A RESIDENT] A NY INCOME [BY WAY OF INTEREST ON SECURITIES] SHALL, [A T THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE O R AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CH EQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER], DEDUCT 6 INCOME-TAX [***] AT THE RATES IN FORCE ON THE AMOUN T OF THE INTEREST PAYABLE: PAYMENTS TO CONTRACTORS AND SUB-CONTRACTORS. 194C. (1) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO AN Y RESIDENT (HEREINAFTER IN THIS SECTION REFERRED TO A S THE CONTRACTOR) FOR CARRYING OUT ANY WORK (INCLUDING SU PPLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND ** ** ** SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACC OUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CAS H OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WH ICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO- (I) ONE PER CENT IN CASE OF ADVERTISING, (II) IN ANY OTHER CASE TWO PER CENT, OF SUCH AS INC OME-TAX ON INCOME COMPRISED THEREIN. COMMISSION OR BROKERAGE: 194-H: ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING, ON OR AFTER THE 1ST DAY OF JUNE, 2001, TO A RESIDENT, ANY INCOM E BY WAY OF COMMISSION (NOT BEING INSURANCE COMMISSION REFER RED TO IN SECTION 194D) OR BROKERAGE, SHALL, AT THE TIME O F CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE T IME OF PAYMENT OF SUCH INCOME IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER , DEDUCT INCOME-TAX THEREON AT THE RATE OF (TEN) PER CENT: ** ** ** RENT. 194-I. ANY PERSON NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY INCOME BY WAY OF RENT, SHALL, AT THE TIME OF CR EDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME O F PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAF T OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATE OF (A) TEN PER CENT FOR THE USE OF ANY MACHINERY OR PL ANT OR EQUIPMENT; (B) FIFTEEN PER CENT FOR THE USE OF ANY LAND OR BUI LDING (INCLUDING FACTORY BUILDING) OR LAND APPURTENANT TO A BUILDING (INCLUDING FACTORY BUILDING) OR FURNITURE OR FITTIN GS WHERE THE PAYEE IS AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY; AND (C) TWENTY PER CENT FOR THE USE OF ANY LAND OR BUIL DING (INCLUDING FACTORY BUILDING) OR LAND APPURTENANT TO A BUILDING (INCLUDING FACTORY BUILDING) OR FURNITURE OR FITTIN GS WHERE THE PAYEE IS A PERSON OTHER THAN AN INDIVIDUAL OR A HIN DU UNDIVIDED FAMILY: FEES FOR PROFESSIONAL OR TECHNICAL SERVICES SECTION 194-J:- (1) ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY SUM BY WAY OF - (A) FEES FOR PROFESSIONAL SERVICES, OR (B) FEES FOR TECHNICAL SERVICES, 7 (C) ROYALTY, OR (D) ANY SUM REFERRED TO IN CLAUSE (VA) OF SECTION 2 8, SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF TH E PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO TEN PER CENT OF SUCH SUM AS INCOME TAX ON INCOME COMPRISED THEREIN: ** ** ** EXPLANATION. FOR THE PURPOSES OF THIS SECTION,- (A) PROFESSIONAL SERVICES MEANS SERVICES RENDERED BY A PERSON IN THE COURSE OF CARRYING ON LEGAL, MEDICAL, ENGINEERING OR ARCHITECTURAL PROFESSION OR THE PROF ESSION OF ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DE CORATION OR ADVERTISING OR SUCH OTHER PROFESSION AS IS NOTIF IED BY THE BOARD FOR THE PURPOSES OF SECTION 44AA OR OF THIS S ECTION; (B) FEES FOR TECHNICAL SERVICES SHALL HAVE THE SA ME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (I) OF SECTION9; (BA) ROYALTY SHALL HAVE THE SAME MEANING AS IN EX PLANATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9; (C) WHERE ANY SUM REFERRED TO IN SUB-SECTION (1) IS CREDITED TO ANY ACCOUNT, WHETHER CALLED SUSPENSE ACCOUNT OR B Y ANY OTHER NAME, IN THE BOOKS OF ACCOUNT OF THE PERSON L IABLE TO PAY SUCH SUM, SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH SUM TO THE ACCOUNT OF THE PAYEE AND THE PROVIS IONS OF THIS SECTION SHALL APPLY ACCORDINGLY. IF WE EXAMINE THE AFOREMENTIONED SECTIONS, WE FIND THAT IDENTICAL CONSIDERATIONS PERMEATE THROUGH ALL THE AFOREMENTIONED SECTIONS WHICH ARE AS UNDER:- (I) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO AN Y RESIDENT IN RESPECT OF AFOREMENTIONED ITEMS; (II) SHALL; (III) AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCO UNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER; (IV) DEDUCT INCOME TAX THEREON AT THE PRESCRIBED RA TE; THE TERM 'SHALL' USED IN ALL THESE SECTIONS MAKE IT CLEAR THAT THESE ARE MANDATORY PROVISIONS AND APPLICABLE TO TH E ENTIRE SUM CONTEMPLATED UNDER THE RESPECTIVE SECTIONS. THE SE SECTIONS DO NOT GIVE ANY LEVERAGE TO THE ASSESSEE T O MAKE THE PAYMENT WITHOUT MAKING TDS. ON THE CONTRARY, TH E INTENTION OF THE LEGISLATURE IS EVIDENT FROM THE FA CT THAT TIMING OF DEDUCTION OF TAX IS EARLIEST POSSIBLE OPPORTUNIT Y TO RECOVER TAX, EITHER AT THE TIME OF CREDIT IN THE ACCOUNT OF PAYEE OR AT THE TIME OF PAYMENT TO PAYEE, WHICHEVER IS EARLIER. WHEN WE EXAMINE SECTION 40(A)(IA) IN THE BACKDROP O F THESE SECTIONS, WE FIND THAT IT REFERS TO THE AMOUNT 'PAY ABLE' 'ON WHICH TAX WAS DEDUCTIBLE AT SOURCE UNDER CHAPTER XV II-B'. APPLYING THE PRINCIPLES OF EUJESDEM GENERIS, IT CAN EASILY BE INFERRED THAT TERM 'PAYABLE' IN SECTION 40(A)(IA) H AS TO BE INTERPRETED IN THE LIGHT OF SUM REFERRED TO IN VARI OUS SECTIONS 8 CONTAINED IN CHAPTER XVII-B NOTED ABOVE, ON WHICH T AX WAS DEDUCTIBLE AND, THEREFORE, THE TERM 'PAYABLE' IN SE CTION 40(A)(IA) REFERS TO ENTIRE AMOUNT ON WHICH TAX WAS REQUIRED TO BE DEDUCTED. KEEPING IN VIEW THE PRINCIPLES OF HARM ONIOUS CONSTRUCTION, THE TERM 'PAYABLE' IN SECTION 40(A)(I A) CANNOT BE READ SEPARATELY FROM THE PROVISIONS RELATING TO TDS AS PLEADED ON BEHALF OF ASSESSEE. IN OUR OPINION, LD. CIT (APPEALS) HAS RIGHTLY OBSERVED THAT TAKING THE SPIR IT OF TDS PROVISION INTO ACCOUNT AND SECTION 40(A)(IA) BEING DIRECTLY RELATED TO SUCH TDS PROVISION, A HARMONIOUS CONSTRU CTION OF THE WORD 'PAYABLE' LEADS TO INEVITABLE CONCLUSION T HAT THE SAID WORD ALSO INCLUDES THE 'PAID' AMOUNT. 14. LD. COUNSEL HAS RELIED ON THE DICTIONARY MEANING OF TERM 'PAYABLE' WHICH, IN OUR OPINION, CANNOT BE RESORTED TO IN VIEW OF DISCUSSION IN FOREGOING PARAS. THE CONTEXT IN WH ICH TERM 'PAYABLE' HAS BEEN USED IN SECTION 40(A)(IA) IS TO BE TAKEN INTO CONSIDERATION. THE CONTEXT IS VARIOUS SECTIONS OF CHAPTER XVII-B. 15. THE NEXT ARGUMENT OF LD. COUNSEL IS BASED ON THE DEFINITION OF TERM 'PAID' AS CONTEMPLATED UNDER SEC TION 43(2) WHICH READS AS UNDER:- 43(2) : PAID MEANS ACTUALLY PAID OR INCURRED ACC ORDING TO THE METHOD OF ACCOUNTING UPON THE BASIS OF WHICH TH E PROFITS OR GAINS ARE COMPUTED UNDER THE HEAD PROFITS AND G AINS OF BUSINESS OR PROFESSION . 16. A BARE READING OF THE ABOVE PROVISION WOULD MAKE IT CLEAR THAT THE TERM 'PAID' DOES NOT ONLY MEAN ACTUA L PAYMENT BUT IF THE LIABILITY HAS BEEN INCURRED ACCORDING TO THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE, THEN THE SA ME ALSO COMES WITHIN THE PURVIEW OF TERM 'PAID'. IF THE ASS ESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING THEN AS S OON AS THE LIABILITY ACCRUES IN ITS FAVOUR, THE SAME IS AC COUNTED FOR BY CREDITING THE AMOUNT OF PAYEE. THUS, IT IS EVIDE NT THAT THE EMPHASIS IS ON LIABILITY TO PAY AND NOT ON ACTUAL P AYMENT. IF WE ACCEPT THE CONTENTION OF ASSESSEE, THEN SECTION 40(A)(IA) WOULD BECOME OTIOSE AND THE SECTION WILL NOT BE ATT RACTED WHERE PAYMENT IS MADE THOUGH WITHOUT DEDUCTING TAX AT SOURCE. LD. COUNSEL HAS REFERRED TO THE VARIOUS DEC ISIONS AND IN THE CASE OF JAIPUR VIDYUT VITARAN NIGAM LIMI TED (SUPRA), THE TRIBUNAL HAD RELIED ON THE DEFINITION OF SECTION 43(2) BUT THE IMPORT OF PHRASE 'INCURRED IN ACCORDA NCE WITH THE METHOD OF ACCOUNTING FOLLOWED' WAS NOT CONSIDER ED. THEREFORE, THE FINDING THAT BY IMPLICATION THE WORD 'PAYABLE' DOES NOT INCLUDE 'PAID' CANNOT BE ACCEPTED. 17. THE NEXT ARGUMENT OF LD. COUNSEL FOR THE ASSESSEE I S BASED ON RULE 30, WHICH CONTEMPLATES TIME AND MODE OF PAYMENT TO GOVERNMENT ACCOUNT OF TAX DEDUCTED AT SO URCE. IN OUR OPINION, THIS RULE MERELY CONTEMPLATES THE P ROCEDURE OF DEPOSITING THE TDS AMOUNT AND MERELY BECAUSE DIF FERENT TIME LIMITS ARE PRESCRIBED, IT WOULD NOT FOLLOW THA T DIFFERENT CONSIDERATIONS WOULD APPLY WHILE CONSIDERING THE TE RM 'PAYABLE' UNDER SECTION 40(A)(IA) OF THE ACT. LD. C OUNSEL HAS ALSO REFERRED TO SECTION 234B DEALING WITH LEVY OF INTEREST TO DEMONSTRATE THAT ACTUAL PAYMENT AND PAYABLE AMOUNT ARE TO BE SEPARATELY DEALT WITH. HOWEVER, THESE PROCEDURAL SECTIONS CANNOT OVERRIDE THE SUBSTANTIVE PROVISION OF THE AC T. TRIBUNAL IN THE CASE OF JAIPUR VIDYUT VITARAN NIGAM LIMITED (SUPRA) 9 HAS ALSO OBSERVED THAT SECTION 40(A)(IA) BEING A LE GAL FICTION NEEDS TO BE CONSTRUED STRICTLY. THERE IS NO QUARREL WITH THIS PROPOSITION BUT AT THE SAME TIME WE HAVE TO TAKE IN TO CONSIDERATION THE CONTEXT IN WHICH A PARTICULAR WOR D IS USED AND THE OVERALL PURPOSE SOUGHT TO BE ACHIEVED BY IN SERTING A SECTION IN THE ACT. 18. ONE MORE ARGUMENT OF ASSESSEE IS THAT IF THE AMOUNT HAS ALREADY PAID, THEN THE ASSESSEE WILL NOT BE ABL E TO IN A POSITION TO DEDUCT ANY PAY TAX, BECAUSE, UNDER SUCH CIRCUMSTANCES, AS PER THE PROVISIONS OF SECTION 191 , THE LIABILITY FOR PAYMENT OF TAX IS TO BE DISCHARGED BY PAYEE. IN THE FIRST PLACE, THE ARGUMENT SEEMS TO BE QUITE CON VINCING BECAUSE THE ASSESSEE WOULD BE DEPRIVED OF GENUINE EXPENDITURE AND THE PAYEE WILL PAY THE TAX ON ITS I NCOME. FURTHER, THE PROVISO TO SECTION 40 (A)(IA) DOES NOT MAKE ANY PROVISION IN REGARD TO THIS CONTINGENCY. THIS MAY B E A CASE OF CASUS OMISUS BUT THE COURT CANNOT FILL THIS GAP. HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF DEY'S MEDICALS (UP) (P) LTD. CASE (SUPRA) OBSERVED AS UNDER:- 'ONCE A DEDUCTION OF A PARTICULAR AMOUNT IS NOT ALL OWABLE UNDER THE ACT, IT IS LIABLE TO BE TAXED AND MERELY BECAUSE SOME OTHER PERSON MAY ALSO BE LIABLE TO TAX AFTER R ECEIVING THE SAID AMOUNT IN ONE OR THE OTHER MANNER, IT CANN OT BE SAID THAT FORMER ASSESSEE IS ENTITLED FOR EXEMPTION AND CANNOT BE TAXED. NO AUTHORITY IS SHOWN PROVIDING THAT SUCH TA XATION IS NOT PERMISSIBLE IN LAW AND IS BAD EVEN OTHERWISE.' 19. LD. CIT, DR HAS STRONGLY RELIED ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF TUBE INVES TMENTS OF INDIA LTD.S CASE (SUPRA). THE CONTENTION OF LD. COUNSEL FOR THE ASSESSEE IS THAT THIS DECISION WAS RENDERED IN THE CONTEXT OF CONSTITUTIONAL VALIDITY OF THE PROVISION S OF SECTION 40(A)(IA) AND, THEREFORE, IN VIEW OF THE DECISION O F HONBLE DELHI HIGH COURT IN THE CASE OF LACHMAN DASS BHATIA HINGWALA (P) LTD.S CASE (SUPRA), THE SAID DECISION IS NOT RELEVANT. IT IS TRUE THAT THIS DECISION HAS BEEN RE NDERED IN THE CONTEXT OF EXAMINING OF CONSTITUTIONAL VALIDITY OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT BUT IN C OURSE OF EXAMINING THE CONSTITUTIONAL VALIDITY, HONBLE MADR AS HIGH COURT HAS EXTENSIVELY CONSIDERED THE IMPORT OF SECT ION 40(A)(IA) AND, THEREFORE, IN OUR OPINION, THIS DECI SION HAS STRONG BEARING ON THE PRESENT ISSUE. 20. HONBLE MADRAS HIGH COURT HAS NOTICED VARIOUS CONTENTIONS OF ASSESSEE. WE RE-PRODUCE SOME CONTENT IONS, WHICH HAVE DIRECT BEARING ON THE PRESENT ISSUE:- AT PARA 5 OF JUDGMENT: MR. C. NATARAJAN, LEARNED S ENIOR COUNSEL APPEARING FOR THE PETITIONERS IN WRIT PETN. NOS. 10750 AND 10751 OF 2009 CONTENDED THAT WHILE CONTRA CTORS BUSINESS HAS NO NEXUS TO THE DETERMINATION OF PROFI TS AND GAINS OF THE BUSINESS OF THE PETITIONER, S. 40(A)(I A) MUTATES ITSELF TO TAX THE PETITIONERS AT A DISPROPORTIONATE RATE AND QUANTUM WHILE PURPORTING TO ADDRESS S. 194C AND THE CONTRACTORS. ACCORDING TO HIM THE EFFECT OF S. 40(A ) (IA) IS SO GROSSLY UNREASONABLE THAT IT IMPOSES TAX LIABILITY ON THE BUSINESS OF THE PETITIONERS EVEN IF THE CONTRACTOR HIMSELF PAID THE TAX IN HIS RETURNS IN THE ABSENCE OF TDS EFFECT ED BY THE PETITIONERS. 10 AT PARA 14 OF JUDGMENT: ACCORDING TO THE LEARNED SE NIOR COUNSEL, THE IMPLICATION OF S. 40(A)(IA) IS IRRESPE CTIVE OF THE CIRCUMSTANCES IN WHICH THE DEDUCTION FAILED TO BE M ADE AND THEREFORE IT IS ARBITRARY. BY RELYING UPON THE DECI SIONS OF THE HONBLE SUPREME COURT IN THE CASE OF COCA COLA AND ELI LILY, THE LEARNED SENIOR COUNSEL CONTENDED THAT WHEN THE HONBLE SUPREME COURT HAS HELD THAT THE LIABILITY OF AN ASS ESSEE UNDER S. 201 ON FAILURE TO DEDUCT OR PAY TAX DISAPP EARS ONCE THE RECIPIENT HAS PAID THE FIX AND EVEN PENALTY CAN NOT BE LEVIED IF THERE WAS A REASONABLE CAUSE FOR NON-DEDU CTION, IT SHOULD BE HELD THAT S. 40(A)(IA) CANNOT BE INVOKED IN THE CASE WERE THE RECIPIENT HAD PAID THE TAX. ABSENCE OF SUC H A RELIEF UNDER S. 40(A)(IA) MAKES THE PROVISION ARBITRARY. AT PARA 18 OF JUDGMENT: ACCORDING TO THE LEARNED CO UNSEL WHEN THE OBJECT OF INTRODUCTION OF S. 40(A)(IA) IS TO ENFORCE TDS PROVISION, IN THE LIGHT OF THE FACT THAT VERY M ANY PROVISIONS BY WAY OF IMPOSITION OF PENALTY, INTERES T AND PROSECUTION HAVE BEEN PROVIDED UNDER THE RECOVERY C HAPTER VIZ. CHAPTER XVII, THE ADDITION OF S. 40(A)(IA) DIS ALLOWING THE WHOLE OF THE ACTUAL EXPENDITURE IS HIGHLY ONEROUS A ND THEREBY IT BECOMES ARBITRARY, UNREASONABLE WARRANTI NG DECLARATION OF THE PROVISION AS ULTRA VIRES OF THE CONSTITUTION. AT PARA 20 OF JUDGMENT: ACCORDING TO THE LEARNED CO UNSEL, THE PROVISO TO S. 40(A)(IA) DOES NOT IN ANY WAY MIT IGATE THE DAMAGE CAUSED UNDER THE MAIN PROVISION. IT WAS ALSO CONTENDED THAT UNDER S. 195(5) OF THE ACT RELATING TO NON- RESIDENTS, WHERE ON PRODUCTION OF A CERTIFICATE AS PER THE IT RULES, THE REQUIREMENT OF TDS IS EXEMPTED, SUCH A S AFETY VALVE MEASURE NOT BEING AVAILABLE IN RESPECT OF A R ESIDENT RECIPIENT, S. 40(A)(IA) IS UNREASONABLE AND UNJUSTI FIABLE. AT PARA 24 OF JUDGMENT: ACCORDING TO THE LEARNED CO UNSEL A COMPARATIVE READING OF S.40(A)(IA) AND S. 198 WOULD SHOW THAT WHILE UNDER S. 198, THE NON-DEDUCTION OF TDS W OULD RESULT IN DEEMED INCOME IN THE HANDS OF THE ASSESSE E, THERE IS NO SUCH EXPRESSION IN S. 40(A)(IA) AND CONSEQUEN TLY THE NON-INCOME VIZ., THE EXPENDITURE CANNOT BE TREATED AS DEEMED INCOME IN THE HANDS OF THE ASSESSEE. THE LEA RNED COUNSEL ALSO CONTENDED THAT SINCE THE RECIPIENT OF THE EXPENDITURE OF THE ASSESSEE IS ALSO TAXED, THE IMPO SITION OF TAX BY INVOKING S. 40(A)(IA) WOULD RESULT IN DOUBLE TAXATION WHICH CANNOT BE PERMITTED. AT PARA 25 OF JUDGMENT: THE LEARNED COUNSEL BY POIN TING OUT SS. 205 AND 64 OF THE ACT CONTENDED THAT IN SIMILAR SITUATIONS THE LEGISLATURE HAS MADE SPECIFIC EXONERATION OF DO UBLE TAXATION. THE LEARNED COUNSEL RELIED UPON: (I) CIT V. INDO NIPPON CHEMICALS CO. LTD. [2003] 18 2 CTR 291/[2003] 261 ITR 275 (SC); (II) K.P. VARGHESE V. CIT [1981] 24 CTR 358 [1981] 131 ITR 597 (SC); (III) NAVNIT LAI C. JAVERI V. K.K.SEN, AAC [1065] 5 6 ITR 198 (SC); (IV) GOVIND SARAN GANGA SARAN V. CST [1985] 155 ITR 144 (SC); (V) GODHIRA ELECTRICITY CO. LTD. V. CIT [1997] 139 (JR 564/ [1997] 225 ITR 746 (SC) IN SUPPORT OF HIS SUBMISSIO NS. 11 AT PARA 33 OF JUDGMENT: IT WAS THEN CONTENDED THAT AN EXPENDITURE IS NOT AN INCOME AND CONSEQUENTLY THE C OLLECTION OF TAX AS ENVISAGED UNDER ART. 265 IS NOT PERMISSIB LE. IT WAS ALSO CONTENDED THAT S. 40(A)(IA) CONFLICTS WITH S. 145 OF THE ACT SINCE THE METHOD OF ACCOUNTING IS DISTURBED. AT PARA 41 OF JUDGMENT: AS AGAINST THE SUBMISSIONS OF THE PETITIONERS THAT THE PROVISION IS ILLUSORY, THE LEA RNED COUNSEL CONTENDED THAT THOUGH THE WORDS USED IN THE PROVISO ARE DEDUCT AND PAY, THERE IS NO PROHIBITION FOR THE ASS ESSEE TO MAKE THE PAYMENT WITHOUT ANY DEDUCTION. IN THAT CON TEXT, THE LEARNED COUNSEL RELIED UPON S. 195A AND STATED THAT SUCH A SITUATION IS ENVISAGED THEREIN. THE LEARNED STANDIN G COUNSEL ALSO RELIED UPON ADDL CIT V. FARASOL LTD. [1987] 16 3 ITR 364 (RAJ.) WHERE IN THE CONTEXT OF S.40(A) IT WAS HELD BY THE RAJASTHAN HIGH COURT THAT EVEN WHERE THE AMOUNT IS PAID OUT OF THE ASSESSEES POCKET BUT NOT DEDUCTED, HE WOULD BE ELIGIBLE FOR THE DEDUCTION. AT PARA 46 OF JUDGMENT : MR.K. SUBRAMANIAM, LEARNED STANDING COUNSEL FOR THE IT DEPARTMENT BROUGHT TO O UR NOTICE THE CBDT CIRCULARS PUBLISHED IN [2009] 310 ITR (ST) 55, WHEREIN IT WAS STATED THAT THE INTRODUCTION OF S.40 (A)(IA) ALLOWS ADDITIONAL TIME (TILL DUE DATE OF FILING RET URN OF INCOME) FOR DEPOSIT OF TDS PURSUANT TO THE DEDUCTION MADE F OR THE MONTH OF MARCH SO THAT THE DISALLOWANCE UNDER THE S UB- CLAUSE IS NOT ATTRACTED. THE LEARNED STANDING COUNS EL SUBMITTED A STATEMENT CONTAINING THE TDS COLLECTION S FOR THE FINANCIAL YEAR 2008-09, WHICH WAS RS.1,30,470.8 CRO RES AS COMPARED TO OTHER FORMS OF TAX COLLECTIONS WHICH SH OWS THAT OUT OF THE NET COLLECTION, AT LEAST 1/3 IS BY WAY O F TDS. THE LEARNED STANDING COUNSEL THEREFORE CONTENDED THAT T HE OBJECT FOR INTRODUCING S.40(A)(IA) HAS REALLY WORKED VIZ., AUGMENTATION OF THE TDS PROVISION AND THEREFORE THE PROVISION SHOULD BE UPHELD. IN THE BACKDROP OF THESE SUBMISSIONS, HONBLE MADRA S HIGH COURT UPHELD THE CONSTITUTIONAL VALIDITY OF THE PRO VISIONS OF SECTION 40(A)(IA) AND MADE VARIOUS OBSERVATIONS:- (I) HONBLE MADRAS HIGH COURT, INTER ALIA, NOTED TH E OBSERVATIONS OF HONBLE SUPREME COURT IN THE CASE O F A.S.KRISHNA V. STATE OF MADRAS AIR 1957 SC 297 WHIC H ARE AS UNDER:- IT WOULD BE QUITE AN ERRONEOUS APPROACH TO THE QUE STION TO VIEW SUCH A STATUTE NOT AS AN ORGANIC WHOLE, BUT AS A MERE COLLECTION OF SECTIONS THEN DISINTEGRATE IT INTO PA RTS, EXAMINE UNDER WHAT HEADS OF LEGISLATION THOSE PARTS WOULD S EVERALLY FALL, AND BY THAT PROCESS DETERMINE WHAT PORTIONS T HEREOF ARE INTER VIRES AND WHAT ARE NOT. THUS, SECTION 40(A)(I A) COULD NOT BE VIEWED INDEPENDENTLY AND HAD TO BE CONSIDERED AL ONG WITH OTHER PROVISIONS. (II) THE PROVISIONS OF SECTION 40(A)(IA) WERE COMPA RED WITH THE PROVISIONS OF SECTION 201 OF THE INCOME TAX ACT AND, IT WAS, INTER ALIA, OBSERVED THAT AS FAR AS SECTION 20 1 IS CONCERNED THAT WOULD RELATE TO THE AMOUNT OF TAX TH AT COULD BE DEDUCTED BY WAY OF TDS. HOWEVER, AS FAR AS SECTI ON 40(A)(IA) IS CONCERNED, WHICH WOULD RESULT IN THE DISALLOWANCE OF WHOLE OF THE EXPENDITURE AND THEREB Y THE ENTIRE SUM EXPENDED WOULD ATTRACT THE LEVY OF TAX A T A 12 PRESCRIBED RATE WITH ALL OTHER CONDITIONS SUCH AS S URCHARGE, ETC. THUS, HONBLE MADRAS HIGH COURT HAS ALSO HELD IN PARA 61 OF ITS JUDGMENT THAT WHOLE OF THE EXPENDITURE C LAIMED WITHOUT MAKING TDS IS TO BE DISALLOWED AND NOT ONLY PART OF THE EXPENDITURE. (III) THE FINANCE BILL NO.2 OF 2004 STATES THAT THE INSERTION OF CLAUSE (IA) IN CLAUSE (A) TO SECTION 40 OF THE ACT WAS WITH A VIEW TO AUGMENT COMPLIANCE OF TDS PROVISIONS. (IV) WHEN THE PROVISIONS AND PROCEDURES RELATING TO TDS ARE SCRUPULOUSLY APPLIED, FIRST AND FOREMOST IT ENSURES THE IDENTIFICATION OF THE PAYEES AND THEREBY NETWORK OF ASSESSEES GETS CONFIRMED. WHEN ONCE SUCH IDENTITY O F ASSESSEES, WHO ARE IN RECEIPT OF THE INCOME CAN BE ASCERTAINED, IT WILL ENABLE TAX COLLECTION MACHINER Y TO BRING WITHIN ITS FOLD ALL SUCH PERSONS WHO ARE LIABLE TO COME WITHIN THE NETWORK OF TAXPAYERS. THUS, IF IT IS HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE IN RESPECT OF THOSE PAYMENTS WHICH H AVE BEEN PAID WITHOUT MAKING TDS AND AT THE END OF THE YEAR NO AMOUNT IS OUTSTANDING THEN THE VERY OBJECT OF IDENT IFICATION OF PAYEES WILL GET FRUSTRATED. (V) THE LEGISLATIVE INTENT OF THE INTRODUCTION OF S ECTION 40(A)(IA) IS IN THE LARGER PERSPECTIVE OF AUGMENTIN G THE VERY TDS PROVISIONS THEMSELVES. IT IS NOT MERELY RELATED TO THE COLLECTION OF TDS ONLY. (VI) THE INTENTION OF THE LEGISLATURE IS NOT TO TAX THE PAYER FOR ITS FAILURE TO DEDUCT THE TAX AT SOURCE. THE OBJECT OF INTRODUCTION OF SECTION 40(A)(I) AS WELL AS SECTION 40(A)(IA) IS TO ENSURE THAT ONE OF THE MODES OF RECOVERY AS PROV IDED IN CHAPTER XVII-B IS SCRUPULOUSLY IMPLEMENTED WITHOUT ANY DEFAULT, IN ORDER TO AUGMENT THE SAID MODE OF RECOV ERY. HONBLE MADRAS HIGH COURT, INTER ALIA, OBSERVED AT PARA 69 OF ITS JUDGMENT AS UNDER:- WITH THE PROVISO TO SECTION 40(A)(IA) THE DEDUCTIO N IN THE SUBSEQUENT YEAR BY RECTIFYING THE DEFAULT COMMITTED IN THE MATTER OF TDS IN THE PREVIOUS YEAR , A DEFAULTING ASSESSEE CANNOT BE HEARD TO SAY THAT IRRESPECTIVE OF THE DELIBERATE DEFAULT COMMITTED BY IT IN IMPLEMENTING THE PROVISION RELATING TO TDS, IT SHOU LD BE HELD THAT A HIGHER TAX LIABILITY IS MULCTED ON I T. HONBLE MADRAS HIGH COURT, INTER ALIA, OBSERVED IN PARA 83 OF ITS JUDGMENT AS UNDER:- AFTER ALL THE PROVISO HAS BEEN INSERTED IN ORDER T O ENSURE THAT EVEN A DEFAULTER IS NOT PUT TO SERIOUS PREJUDICE, IN AS MUCH AS, BY OPERATION OF THE SUBSTANTIVE PROVISION, THE EXPENDITURE WHICH IS OTHERWISE ALLOWABLE AS A DEDUCTION IS DENIED ON THE GROUND THAT THE OBLIGATION OF TDS PROVISIONS IS VIOLATED. THE LAW MAKES WHILE IMPOSING SUCH A STRINGENT RESTRICTION WANTED TO SIMULTANEOUSLY PROV IDE SCOPE FOR THE DEFAULTER TO GAIN THE DEDUCTION BY COMPLYING WITH THE TDS PROVISION AT A LATER PINT OF TIME. 13 THUS, IMPLIEDLY HONBLE MADRAS HIGH COURT, HAS, INT ER ALIA, HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) WILL BE APPLICABLE WITH RESPECT TO ENTIRE EXPENDITURE. IT IS TRUE THAT SPECIFIC ISSUE REGARDING PAID, CREDITED AND PAYABLE HAS NOT BEEN CONSIDERED BUT FROM THE JUDGMENT IT IS EVIDENT THAT IF ASSESSEES CONTENTION IS ACCEPTED THEN THE VERY OBJ ECT OF INCORPORATION OF SECTION 40(A)(IA) WOULD BE FRUSTRA TED. 21. IN VIEW OF ABOVE DISCUSSION, WE ANSWER THE QUESTION AS UNDER:- THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME T AX ACT, 1961, ARE APPLICABLE NOT ONLY TO THE AMOUNT WHICH I S SHOWN AS PAYABLE ON THE DATE OF BALANCE-SHEET, BUT IT IS APPLICABLE TO SUCH EXPENDITURE, WHICH BECOME PAYABLE AT ANY TI ME DURING THE RELEVANT PREVIOUS YEAR AND WAS ACTUALLY PAID WITHIN THE PREVIOUS YEAR. IN THE RESULT THE QUESTIO N IS DECIDED IN FAVOUR OF REVENUE AND AGAINST THE ASSESSEE. 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 TH E CASE OF MERILYN SHIPPING. WE ALREADY HAVE QUOTED EXTENSIVELY BOTH THE MAJORIT Y AND THE MINORITY VIEWS EXPRESSED IN THE AFORESAID CASE. THE MAIN THRUST OF THE MAJORITY VIEW IS BASED ON THE FACT T HAT THE LEGISLATURE HAS REPLACED THE EXPRESSION AMOUNTS CR EDITED OR PAID WITH THE EXPRESSION PAYABLE IN THE FINAL ENACTMENT. COMPARISON BETWEEN THE PRE-AMENDMENT AND POST AMENDMENT LAW IS PERMISSIBLE FOR THE PURPOSE OF ASCERTAINING THE MISCHIEF SOUGHT TO BE REMEDIED OR THE OBJECT SOUGHT TO BE ACHIEVED BY AN AMENDMENT. THIS IS PREC ISELY WHAT WAS DONE BY THE APEX COURT IN THE CASE OF CIT VS. KELVINATOR REPORTED IN 2010(2) SCC 723. BUT THE SAM E 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 TH E ENACTED LAW. IT IS THE FINALLY ENACTED LAW WHICH IS THE WILL OF THE LEGISLATURE. THE LEARNED TRIBUNAL FELL INTO AN ERROR IN NOT REAL IZING THIS ASPECT OF THE MATTER. THE LEARNED TRIBUNAL HELD THAT WHERE LANGUAGE IS C LEAR THE INTENTION OF THE LEGISLATURE IS TO BE GATHERED FROM THE LANGUAGE USED. HAVING HELD SO, IT WAS NOT OPEN TO SEEK TO INTERPRET THE SECTION ON THE BASIS OF ANY COMPARISO N BETWEEN THE DRAFT AND THE SECTION ACTUALLY ENACTED NOR WAS IT OPEN TO SPECULATE AS TO THE EFFECT OF THE SO-CALLED REPRESE NTATIONS MADE BY THE PROFESSIONAL BODIES. THE LEARNED TRIBUNAL HELD THAT SECTION 40(A)(IA) O F THE ACT CREATES A LEGAL FICTION BY VIRTUE OF WHICH EVEN THE GENUINE AND ADMISSIBLE EXPENSES CLAIMED BY AN ASSESSEE UNDE R THE HEAD INCOME FROM BUSINESS AND PROFESSION IF THE A SSESSEE 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 A ND, 14 THEREFORE, CANNOT BE INVOKED BY ASSESSING OFFICER T O DISALLOW THE GENUINE AND REASONABLE EXPENDITURE ON THE AMOUN TS 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 MIND THAT THE LEA RNED TRIBUNAL REALIZED THE MEANING AND PURPORT OF SECTIO N 40(A)(IA) CORRECTLY WHEN IT HELD THAT IN CASE OF OM ISSION 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 RESTR ICTED TO THE MONEY WHICH IS YET TO BE PAID. WHAT THE TRIBUNAL BY MAJORITY DID WAS TO SUPPLY THE CASUS OMISSUS WHICH WAS NOT PERMISSIBLE AND COULD ONLY HAVE BEEN DONE BY THE SU PREME COURT IN AN APPROPRIATE CASE. REFERENCE IN THIS REG ARD MAY BE MADE TO THE JUDGMENT IN THE CASE OF BHUWALKA STE EL INDUSTRIES VS. BOMBAY IRON & STEEL LABOUR BOARD REP ORTED IN 2010 (2) SCC 273. UNPROTECTED WORKER WAS FINALLY DEFINED IN SECTION 2 (II) OF THE MATHADI ACT AS FOLLOWS:- UNPROTECTED WORKER MEANS A MANUAL WORKER WHO IS ENGAGED OR TO BE ENGAGED IN ANY SCHEDULED EMPLOYMENT. THE CONTENTION RAISED WITH REFERENCE TO WHAT WAS TH ERE IN THE BILL WAS REJECTED BY THE SUPREME COURT BY HOLDING A S FOLLOWS:- IT MUST, AT THIS JUNCTURE, BE NOTED THAT IN SPITE OF SECTION 2(11), WHICH INCLUDED THE WORDS BUT FOR TH E 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 NO TED THAT WHEN THE BILL CAME TO BE PASSED AND RECEIVED THE ASSENT OF THE VICE- PRESIDENT ON 05-06-1969 AND WAS FIRST PUBLISHED IN THE MAHARASHTRA GOVERNMENT GAZETTE EXTRAORDINARY, PART IV ON 13-06-1969, THE AFOREMENTIONED WORDS WERE OMITTED. THEREFORE, THIS WOULD BE A CLEAR POINTER TO THE LEGISLATIVE INTENT THAT THE LEGISLATURE BEING CONSCIOUS OF THE FACT AND BEI NG 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 PRECISE WORDS, WHICH WERE CONSCIOUSLY AND DELIBERATELY OMITTED FROM THE DEFINITION. THAT WOULD AMOUNT TO SUPPLYING THE CASU S OMISSUS AND WE DO NOT THINK THAT IT IS POSSIBLE, PARTICULARLY, IN THIS CASE. THE LAW OF SUPPLYING TH E 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 RARE 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 CERTAI NLY NOT THE CASE HERE. WE SHALL NOW ENDEAVOUR TO SHOW THAT NO OTHER INTERP RETATION IS POSSIBLE. THE KEY WORDS USED IN SECTION 40(A)(IA ), 15 ACCORDING TO US, ARE ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII B. IF THE QUESTION IS WHICH E XPENSES 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 TURN S ON THE BASIS OF THE FACT THAT THE LEGISLATURE USED THE WOR D PAYABLE AND NOT PAID OR CREDITED. UNLESS ANY AMOUNT IS PA YABLE, IT CAN NEITHER BE PAID NOR CREDITED. IF AN AMOUNT HAS NEITHER BEEN PAID NOR CREDITED, THERE CAN BE NO OCCASION FO R CLAIMING ANY DEDUCTION. THE LANGUAGE USED IN THE DRAFT WAS UNCLEAR AND SUSC EPTIBLE TO GIVING MORE THAN ONE MEANING. BY LOOKING AT THE DRAFT IT COULD BE SAID THAT THE LEGISLATURE WANTED TO TREAT THE PAYMENTS MADE OR CREDITED IN FAVOUR OF A CONTRACTOR OR SUB- CONTRACTOR DIFFERENTLY THAN THE PAYMENTS ON ACCOUNT OF INTEREST, COMMISSION OR BROKERAGE, FEES FOR PROFESS IONAL SERVICES OR FEES FOR TECHNICAL SERVICES BECAUSE THE WORDS AMOUNTS CREDITED OR PAID WERE USED ONLY IN RELATI ON TO A CONTRACTOR OR SUB-CONTRACTOR. THIS DIFFERENTIAL TRE ATMENT WAS NOT INTENDED. THEREFORE, THE LEGISLATURE PROVIDED T HAT THE AMOUNTS, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B PAYABLE ON ACCOUNT OF INTEREST, COMMISSION O R BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SER VICES OR FEES FOR TECHNICAL SERVICES OR TO A CONTRACTOR OR S UB- CONTRACTOR SHALL NOT BE DEDUCTED IN COMPUTING THE I NCOME OF AN ASSESSEE IN CASE HE HAS NOT DEDUCED, OR AFTER DE DUCTION HAS NOT PAID WITHIN THE SPECIFIED TIME. THE LANGUAG E USED BY THE LEGISLATURE IN THE FINALLY ENACTED LAW IS CLEAR AND UNAMBIGUOUS WHEREAS THE LANGUAGE USED IN THE BILL W AS AMBIGUOUS. A FEW WORDS ARE NOW NECESSARY TO DEAL WITH THE SUBM ISSION OF MR. BAGCHI AND MS. ROYCHOWDHURI. THERE CAN BE NO DENIAL THAT THE PROVISION IN QUESTION IS HARSH. BUT THAT IS NO GROUND TO READ THE SAME IN A MANNER WHICH WAS NOT INTENDED BY THE LEGISLATURE. THIS IS OUR ANSWER TO THE SUBMISSION OF MR. BAGCHI. THE SUBMISSION OF MS. ROYCHOWDHURI THAT THE SECOND PROVISO SOUGHT TO BECO ME EFFECTIVE FROM 1ST APRIL, 2013 SHOULD BE HELD TO HA VE 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. I T IS NOT THE CASE OF AN INADVERTENT ERROR. FOR THE REASONS DISCUSSED ABOVE, WE ARE OF THE OPIN ION THAT THE MAJORITY VIEWS EXPRESSED IN THE CASE OF MERILYN SHIPPING & TRANSPORTS ARE NOT ACCEPTABLE. THE SUBMISSIONS AD VANCED BY LEARNED ADVOCATES HAVE ALREADY BEEN DEALT WITH A ND REJECTED. THE APPEAL IS, THUS, ALLOWED IN FAVOUR OF THE REVEN UE. 8.2 WE FIND THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. SIKANDARKHAN N. TUNVAR IN THE ORDER DATED 0 2-05- 2013 REPORTED IN 2013-TIOL-389-HC-AHM HAS HELD AS U NDER : 5. IN ALL THESE APPEALS THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE SPECIAL BENCH IN THE CASE OF M/S. M ERILYN 16 SHIPPING & TRANSPORTS VS. ACIT (SUPRA) AND DELETED THE DISALLOWANCE ON THIS LIMITED GROUND. AS IN THE PRESENT CASE, OTHER GROUNDS OF CONTROVERSY BETWEEN THE PARTIES WI TH RESPECT TO ALLOWABILITY OR OTHERWISE OF SUCH EXPEND ITURE WAS NOT EXAMINED BY THE TRIBUNAL. FOR THE PURPOSE OF TH ESE APPEALS, THEREFORE, WE FRAME FOLLOWING SUBSTANTIAL QUESTIONS OF LAW:- '1. WHETHER 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 31ST MARCH OF THE YEAR UNDER CONSIDERATION? 2. WHETHER DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) LAYS DOWN CORRECT LAW?' 6. COUNSEL FOR THE REVENUE CONTENDED THAT THE TRIB UNAL HAS COMMITTED SERIOUS ERROR IN HOLDING THAT PROVISI ON OF SECTION 40(A)(IA) OF THE ACT WOULD APPLY ONLY WHEN THE AMOUNT HAS REMAINED PAYABLE TILL THE END OF THE ACCOUNTING YEAR. THEY POINTED OUT THAT THE WORD 'PAYABLE' HAS NOT BEEN DEFINED UNDER THE ACT AND THE SAME WOULD, IN THE CO NTEXT OF THE PROVISION UNDER CONSIDERATION, INCLUDE THE EXPR ESSION 'PAID'. ANY OTHER INTERPRETATION WOULD LEAD TO ABSU RD RESULTS. THEY CONTENDED THAT THE INTERPRETATION WHICH ADVANC ES THE TRUE MEANING OF THE PROVISION SHOULD BE ADOPTED AND NOT ONE WHICH FRUSTRATES THE PROVISION. 7. IN THIS RESPECT RELIANCE WAS PLACED ON THE FOLL OWING DECISIONS:- (1) IN THE CASE OF K.P.VARGHESE VS. INCOME-TAX OFFICER, ERNAKULAM, AND ANOTHER REPORTED IN [1981] 131 ITR 597 = (2O02-TIOL-128-SC-IT), IN WHICH IT WAS OBSERVED THAT 'IT IS A WELL RECOGNIZED RULE OF CONSTRUCTION THAT THE STATUTORY PROVISION MUST BE SO CONSTRUED, IF POSSIBLE, THAT ABSURDITY AND MISCHIEF MAY BE AVOIDED.' (2) IN THE CASE OF COMMISSIONER OF INCOME-TAX, BANGALORE VS. J.H. GOLTA REPORTED IN [1985] 156 ITR 323 = (2002-TIOL-131-SC-IT), IN WHICH IT WAS OBSERVED THAT 'WHERE THE PLAIN LITERAL INTERPRETATION OF A STATUTORY PROVISION PRODUCES A MANIFESTLY UNJUST RESULT, WHICH COULD NEVER HAVE BEEN INTENDED BY THE LEGISLATURE, THE COURT MIGHT MODIFY THE LANGUAGE USED BY THE LEGISLATURE SO AS TO ACHIEVE THE INTENTION OF THE LEGISLATURE AND PRODUCE RATIONAL CONSTRUCTION.' (3) IN THE CASE OF C.W.S.(INDIA) LTD. VS. COMMISSIONER OF INCOME-TAX REPORTED IN [1994] 208 ITR 649, IN WHICH IT WAS OBSERVED THAT 'WHILE WE AGREE THAT LITERAL CONSTRUCTION MAY BE THE GENERAL RULE IN CONSTRUING TAXING ENACTMENTS, IT DOES NOT MEAN THAT IT SHOULD BE ADOPTED EVEN IF IT LEADS TO A DISCRIMINATORY OR INCONGRUOUS RESULT. INTERPRETATION OF STATUTES CANNOT BE A MECHANICAL EXERCISE.' 8. COUNSEL ALSO CONTENDED THAT INTERPRETATION MADE BY THE TRIBUNAL LEADS TO RESULTS WHOLLY UNINTENDED BY THE LEGISLATURE. IF DISALLOWANCE UNDER SECTION 40(A)(IA ) IS 17 APPLIED ONLY IN CASE OF AMOUNTS PAYABLE AS ON 31ST MARCH OF THE YEAR UNDER CONSIDERATION, IN LARGE NUMBER OF CASES WHERE THE ASSESSEES MIGHT HAVE ACTUALLY PAID THE AMOUNTS BUT MIGHT NOT HAVE EITHER DEDUCTED TAX AT SOURCE THOUGH REQUIRED UNDER THE ACT OR EVEN AFTER DEDUCTI ON NOT DEPOSITED WITH THE GOVERNMENT, WOULD ESCAPE THE CONSEQUENCES ENVISAGED UNDER THE SAID PROVISION. IT WAS FURTHER CONTENDED THAT SECTION 40(A)(IA) OF THE ACT IN ITS PLAIN LANGUAGE DOES NOT PERMIT SUCH INTERPRETATION ADOPTED BY THE TRIBUNAL IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT(SUPRA). EVEN ON THE PREMISE OF LITERAL CONSTRUCTION, THE VIEW ADOPTED B Y THE TRIBUNAL SHOULD BE REJECTED. 9. ON THE OTHER HAND, COUNSEL APPEARING FOR THE ASSESSEES SUPPORTED THE VIEW OF THE TRIBUNAL. THEY CONTENDED THAT IN TAXING STATUTE THERE IS NO ROOM F OR INTENDMENT. THE PROVISIONS MUST BE CONSTRUED STRICTLY ON THE BASIS OF PLAIN LANGUAGE USED BY THE LEGISLATURE . ACCORDING TO THEM ONLY MEANING THAT CAN BE ASCRIBED TO SECTION 40(A)(IA) OF THE ACT IS THAT THE DISALLOWAN CE CAN BE MADE IN RESPECT OF AMOUNTS, WHICH ARE PAYABLE BUT N OT YET PAID TILL 31ST MARCH OF THE YEAR UNDER CONSIDERATION AND NO OTHER. 10. IT WAS CONTENDED THAT THE PROVISION IN QUESTIO N IS EXPROPRIETARY SINCE IT DISALLOWS ENTIRE EXPENDITURE FOR NOT DEDUCTING A SMALL PORTION OF TAX AT SOURCE. IT IS T HUS IN A NATURE OF PENALTY. IT WAS CONTENDED THAT IN ANY CAS E, SECTION 40(A)(IA) CREATES DEEMING FICTION WHERE THE SUM . THOUGH NOT AN INCOME OF THE ASSESSEE IS TAXED AS SU CH. IT WAS, THEREFORE, CONTENDED THAT SUCH PROVISION SH OULD BE INTERPRETED STRICTLY AND NARROWLY. EVEN IF THE I NTENTION OF THE LEGISLATURE MAY NOT HAVE BEEN TO LIMIT SUCH PROVISION, IF THE PLAIN LANGUAGE OF THE SECTION PER MITS NO OTHER MEANING, THIS COURT CANNOT AND WOULD NOT EXPA ND THE MEANING OF THE SECTION TO COVER ANY LEGISLATIVE IMPERFECTIONS OR ERRORS. 11. IT WAS STRONGLY CONTENDED THAT TERMS 'PAYABLE' AND 'PAID' ARE NOT SYNONYMOUS. SECTION 40(A)(IA), THERE FORE, WHEN USES THE EXPRESSION 'PAYABLE', SUCH TERM MUST BE GIVEN ITS ORDINARY MEANING AND THE EXPRESSION 'PAID ', CANNOT BE READ INTO IT. COUNSEL FURTHER SUBMITTED T HAT THE FINANCE BILL NO.2 OF 2004 UNDER WHICH SECTION 40 OF THE ACT WAS PROPOSED TO BE AMENDED TO INCLUDE CLAUSE (A)(IA) ORIGINALLY USED DIFFERENT LANGUAGE. IN PLACE OF THE WORD 'PAYABLE' EXPRESSION USED WAS 'AMOUNT CREDITED OR P AID'. IN THE AMENDMENT, WHICH WAS ULTIMATELY BROUGHT ABOU T, THE SAID EXPRESSION WAS CONSCIOUSLY DROPPED. THUS, THERE WAS CONSCIOUS OMISSION ON THE PART OF THE LEGISLATURE. THEY, THEREFORE, CONTENDED WITH ALL THE MORE FORCE THAT THE TERM 'PAYABLE' USED IN SECTION 40(A)(IA) OF THE ACT WOULD NOT INCLUDE EXPRESSION 'PAID'. THEY POINTED O UT THAT TERM 'PAID' HAS BEEN DEFINED UNDER SECTION 43( 2) OF THE ACT WHEREAS THE WORD 'PAYABLE' HAS NOT BEEN DEFINED IN THE ACT. 12. IN SUPPORT OF THE CONTENTIONS THEY RELIED ON T HE FOLLOWING DECISION:- IN THE CASE OF MUGAT DYEING AND PRINTING MILLS VS. ASSISTANT COMMISSIONER OF INCOME-TAX REPORTED IN [2 007] 18 290 ITR 282 (GUJ), IN WHICH THE DIVISION BENCH OF T HIS COURT IN THE CONTEXT OF SECTION 43B OF THE ACT OBSE RVED THAT THE EXPRESSION EMPLOYED IN THE SAID SECTION IS 'ACTUALLY PAID' AND IN VIEW OF THE NON-OBSTANTE CLA USE CONTAINED IN THE SAID SECTION, IT WOULD NOT BE PERM ISSIBLE TO REFER TO THE EXPRESSION 'PAID' AS DEFINED UNDER SECTION 43(2) OF THE ACT. THIS DECISION, HOWEVER, WAS RENDERED IN THE BACKGROUND OF SECTION 43B OF THE ACT, WHICH USE D THE EXPRESSION 'ACTUALLY PAID'. RELIANCE WAS PLACED IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. UPNISHAD INVESTMENT P. LTD AND OTHER S REPORTED IN [2003] 260 ITR 532, WHEREIN THE DIVISIO N BENCH OF THIS COURT HAD AN OCCASION TO INTERPRET EXPRESSIONS 'RECEIVABLE' AND 'DUE'. IT WAS OBSERVED THAT EXPRESSIONS 'RECEIVABLE' IS USED WITH REFERENCE TO THE RECIPIENT AND THE WORD 'PAYABLE' IS USED WITH REFER ENCE TO THE PAYER. 13. OUR ATTENTION WAS DRAWN TO THE DECISION OF THE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX, GUJARAT VS. ASHOKBHAI CHIMANBHAI REPORTED IN [1965] 56 ITR 42, WHEREIN WHILE EXPLAINING THE CONC EPT OF TAXABILITY OF INCOME, WHEN IT ACCRUES, ARISES OR IS RECEIVED, IT WAS OBSERVED THAT THE RECEIPT IS NOT THE ONLY TE ST OF CHARGEABILITY TO TAX AND IF INCOME ACCRUES OR ARISE S, IT MAY BECOME LIABLE TO TAX. IN THIS CONTEXT, IT WAS O BSERVED THAT 'WORKING OF COMPANY FROM DAY TO DAY WOULD CERTAINLY NOT INDICATE ANY PROFIT OR LOSS, EVEN WORKING OF TH E COMPANY FROM MONTH TO MONTH COULD NOT BE TAKEN AS A RELIABLE GUIDE FOR THIS PURPOSE. IF THE PROFIT OR L OSS HAS TO BE ASCERTAINED BY COMPARISON OF THE ASSETS AT TWO S TATED POINTS, THE MOST BUSINESSLIKE WAY WOULD BE TO DO SO AT STATED INTERVALS OF ONE YEAR AND THAT WOULD BE A REASONABLE PERIOD TO BE ADOPTED FOR THE PURPOSE.' ON THE BASIS OF SUCH OBSERVATIONS IT WAS CANVASSED THAT TH E PAYABILITY OF THE SUM AS REFERRED TO IN SECTION 40( A)(IA) OF THE ACT MUST BE JUDGED AS ON 31ST MARCH OF THE PART ICULAR YEAR. 14. COUNSEL HAVE ALSO REFERRED TO VARIOUS JUDGMENT S IN SUPPORT OF THE CONTENTION THAT IN THE PRESENT CASE, STRICT INTERPRETATION IS CALLED FOR. IT IS NOT NECESSARY T O REFER TO SUCH DECISIONS. 15. CHAPTER XVII-A OF THE ACT PERTAINS TO COLLECTION AND RECOVERY OF THE TAX. PART-A THEREOF IS GENERAL. PART-B OF CHAPTER XVII PERTAINS TO DEDUCTION AT SOURCE. SE VERAL PROVISIONS HAVE BEEN MADE IN THE SAID CHAPTER FASTE NING THE LIABILITY ON THE PAYEE TO DEDUCT TAX AT SOURCE AND DEPOSIT WITH THE GOVERNMENT. FOR EXAMPLE, SUB-SECTI ON (1) OF SECTION 194A OF THE ACT PROVIDES THAT ANY PERSON, NOT BEING AN INDIVIDUAL OR AN HINDU UNDIVIDED FAMIL Y, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY INCOME BY WAY OF INTEREST OTHER THAN THE INCOME BY WAY OF INTEREST ON SECURITIES, SHALL, AT THE TIME OF CREDIT OF SUCH IN COME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE WHICHEVER IS EARLIER, DEDUCT INCOME TAX AT THE RATES IN FORCE. LIKEWISE SECTION 194C OF THE ACT PROVIDES THAT ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO A NY RESIDENT (REFERRED TO AS A CONTRACTOR) FOR CARRYING OUT ANY WORK INCLUDING SUPPLY OF LABOUR IN PURSUANCE OF A 19 CONTRACT BETWEEN THE CONTRACTOR AND THE SPECIFIED PERSON, SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT THE AMOUNT SPECIFIED IN THE SAID PROVISION AS INCOME-TAX ON IN COME COMPRISED THEREIN. SECTION 200 OF THE ACT PERTAINS TO DUTY OF PERSON DEDUCTING TAX. SUB-SECTION (1) THERE OF PROVIDES THAT ANY PERSON DEDUCTING ANY SUM IN ACCORDANCE WITH THE FOREGOING PROVISIONS OF THE CHA PTER, SHALL PAY WITHIN THE PRESCRIBED TIME, THE SUM SO DE DUCTED TO THE CREDIT OF THE CENTRAL GOVERNMENT OR AS THE B OARD DIRECTS. SECTION 201 PROVIDES FOR CONSEQUENCES OF F AILURE TO DEDUCT OR PAY TAX AT SOURCE. SUB-SECTION (1) THE REOF, IN ESSENCE, PROVIDES THAT ANY PERSON, WHO IS REQUIR ED TO DEDUCT ANY SUM IN ACCORDANCE WITH THE PROVISIONS OF THE ACT OR REFERRED TO IN SUB-SECTION (1) OF SECTION 19 2 BEING AN EMPLOYER BUT DOES NOT DEDUCT OR DOES NOT PAY OR AFTER SO DEDUCTING FAILS TO PAY WHOLE OR PART OF THE TAX AS REQUIRED UNDER THE ACT, THEN SUCH PERSON SHALL, WIT HOUT PREJUDICE TO ANY OTHER CONSEQUENCES WHICH HE MAY IN CUR, BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT O F THE SAID TAX. SECTION 271C OF THE ACT PROVIDES FOR PENA LTY FOR FAILURE TO DEDUCT TAX AT SOURCE. 16. IN ADDITION TO SUCH PROVISIONS ALREADY EXISTIN G, THE LEGISLATURE INTRODUCED YET ANOTHER PROVISION FOR ENSURING COMPLIANCE WITH THE REQUIREMENT OF DEDUCING TAX AT SOURCE AND DEPOSITING IT WITH THE CENTRAL GOVERNMEN T. SECTION 40(A) (IA) RELEVANT FOR OUR PURPOSE READS A S UNDER:- '(IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNT S PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPP LY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED I N SUBSECTION (1) OF SECTION 139: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB-SECTION(L) OF SECTION 139, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID.' 17. IN PLAIN TERMS SECTION 40(A)(IA) PROVIDES THAT IN CASE OF ANY INTEREST, COMMISSION OR BROKERAGE, RENT , ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR FOR CARRYING OUT ANY W ORK ON WHICH TAX IS DEDUCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION HAS NOT BEEN PAID BEFORE THE DUE DATE, SUCH AMOUNTS SHALL NOT BE DEDU CTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' IRRESPECTIVE O F THE PROVISIONS CONTAINED IN SECTIONS 30 TO 38 OF THE AC T. PROVISO TO SECTION 40(A)(IA), HOWEVER, ENABLES THE 20 ASSESSEE TO TAKE SUCH DEDUCTION IN SUBSEQUENT YEAR, IF TAX IS DEDUCTED IN SUCH YEAR OR THOUGH DEDUCTED DURING 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 ARISE S WHETHER UNDER SECTION 40(A)(IA) OF THE ACT DISALLOWANCE OF THE EXPENDITURE PAYMENT OF WHICH, THOUGH REQUIRE D DEDUCTION OF TAX AT SOURCE HAS NOT BEEN MADE WOULD BE CONFINED ONLY TO THOSE CASES WHERE THE AMOUNT REMAI NS PAYABLE TILL THE END OF THE PREVIOUS YEAR OR 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 SPE CIAL BENCH BY A SPLIT OPINION. LEARNED ACCOUNTANT MEMBER WHO WAS IN MINORITY, PLACED HEAVY RELIANCE ON A DECISIO N OF MADRAS HIGH COURT IN THE CASE OF TUBE INVESTMENTS O F INDIA LTD. AND ANOTHER VS. ASSISTANT COMMISSIONER OF INCOME-TAX (TDS) AND OTHERS REPORTED IN [2010] 325 I TR 610 (MAD) = (2O09-TIOL-529-HC-MAD-IT). 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 COURT IN THE PROCESS USEFUL AND APPLICABLE. LEARNED JUDGE REJECTED THE THEORY OF NARROW INTERPRETATION OF TERM 'PAYABLE' A ND OBSERVED AS UNDER: '12.4 IN OUR CONSIDERED OPINION, THERE IS NO AMBIGUITY IN THE SECTION AND TERM 'PAYABLE' CANNOT BE ASCRIBED NARROW INTERPRETATION AS CONTENDED BY ASSESSEE. HAD THE INTENTIONS OF THE LEGISLATURE WERE TO DISALLOW ONLY ITEMS OUTSTANDING AS ON 31ST MARCH, THEN THE TERM 'PAYABLE' WOULD HAVE BEEN QUALIFIED BY THE PHRASE AS OUTSTANDING ON 31ST MARCH. HOWEVER, NO SUCH QUALIFICATION IS THERE IN THE SECTION AND, THEREFORE, THE SAME CANNOT BE READ INTO THE SECTION AS CONTENDED BY THE ASSESSEE.' 20. ON THE OTHER HAND, LEARNED JUDICIAL MEMBER SPEAKING FOR MAJORITY ADOPTED A STRICTER INTERPRETATION. HEAVY RELIANCE WAS PLACED ON THE FINANCE BILL OF 20 04, WHICH INCLUDED THE DRAFT OF THE AMENDMENT IN SECTIO N 40 AND THE ULTIMATE AMENDMENT WHICH ACTUALLY WAS PASSE D BY THE PARLIAMENT. IT WAS OBSERVED THAT FROM THE COMPARISON BETWEEN THE PROPOSED AND THE ENACTED PROVISION IT CAN BE SEEN THAT THE LEGISLATURE HAS R EPLACED THE WORDS 'AMOUNTS CREDITED OR PAID' WITH THE WORD 'PAYABLE' IN THE ENACTMENT. ON SUCH BASIS, IT WAS H ELD THAT THIS IS A CASE OF CONSCIOUS OMISSION AND WHEN THE LANGUAGE WAS CLEAR THE INTENTION OF THE LEGISLATURE HAD TO BE GATHERED FROM LANGUAGE USED. IN THEIR OPINION TH E PROVISION WOULD APPLY ONLY TO AMOUNTS WHICH ARE PAY ABLE AT THE END OF THE YEAR. HAVING SAID SO, CURIOUSLY, IT WAS OBSERVED THAT THE PROVISO TO SECTION 40(A)(IA) OF T HE ACT LAYS DOWN THAT EARLIER YEAR'S PROVISION CAN BE ALLO WED IN SUBSEQUENT YEARS ONLY IF IDS IS DEDUCTED AND DEPOSI TED AND, THEREFORE, REVENUE'S FEAR IS UNFOUNDED AS THE PROVISION OF SECTION 40(A)(IA) OF THE ACT COVERS TH E SITUATION. 21 21. IN THE PRESENT CASE, WE HAVE NO HESITATION IN ACCEPTING THE CONTENTION THAT THE PROVISION MUST BE CONSTRUED STRICTLY. THIS BEING A PROVISION WHICH CR EATES AN ARTIFICIAL CHARGE ON AN AMOUNT WHICH IS OTHERWISE NOT AN INCOME OF THE ASSESSEE, CANNOT BE LIBERALLY CONS TRUED. UNDOUBTEDLY IF THE LANGUAGE OF THE SECTION IS PLAIN , IT MUST BE GIVEN ITS TRUE MEANING IRRESPECTIVE OF THE CONSEQUENCES. WE HAVE NOTICED THAT THE PROVISION MA KES DISALLOWANCE OF AN EXPENDITURE WHICH HAS OTHERWISE BEEN INCURRED AND IS ELIGIBLE FOR DEDUCTION, ON THE GROU ND THAT THOUGH TAX WAS REQUIRED 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 PROVISION, THE LIABILITY CANNO T BE FASTENED IF THE PLAIN MEANING OF THE SECTION DOES N OT SO PERMIT. 22. FOR THE PURPOSE OF THE SAID SECTION, WE ARE AL SO 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 BAS IS OF WHICH PROFITS AND GAINS ARE COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. SUCH DEFINITION IS APPLICABLE FOR THE PURPOSE OF SECTION S 28 TO 41 UNLESS THE CONTEXT OTHERWISE REQUIRES. IN CONTRA ST, TERM 'PAYABLE' HAS NOT BEEN DEFINED. THE WORD 'PAYABLE' HAS BEEN DESCRIBED IN WEBSTER'S THIRD NEW INTERNATIONAL UNABRIDGED DICTIONARY AS REQUIRING TO BE PAID: CAPA BLE OF BEING PAID: SPECIFYING PAYMENT TO A PARTICULAR PAYE E AT A SPECIFIED TIME OR OCCASION OR ANY SPECIFIED MANNER. IN THE CONTEXT OF SECTION 40(A)(IA), THE WORD 'PAYABLE' WO ULD NOT INCLUDE 'PAID'. IN OTHER WORDS, THEREFORE, AN AMOUN T WHICH IS ALREADY PAID OVER CEASES TO BE PAYABLE AND CONVERSELY WHAT IS PAYABLE CANNOT BE ONE THAT IS AL READY PAID. WHEN AS RIGHTLY POINTED OUT BY COUNSEL MR. HE MANI, THE ACT USES TERMS 'PAID' AND 'PAYABLE' AT DIFFEREN T PLACES IN DIFFERENT CONTEXT DIFFERENTLY, FOR THE PURPOSE O F SECTION 40(A)(IA) OF THE ACT, TERM 'PAYABLE' CANNOT BE SEEN TO BE INCLUDING THE EXPRESSION 'PAID'. THE TERM 'PAID' AN D 'PAYABLE' IN THE CONTEXT OF SECTION 40(A)(IA) ARE N OT USED INTERCHANGABLY. IN THE CASE OF BIRLA CEMENT WORKS A ND ANOTHER VS. STATE OF RAJASTHAN AND ANOTHER REPORTED IN AIR 1994 (SC) 2393, THE APEX COURT OBSERVED THAT 'THE WORD PAYABLE IS A DESCRIPTIVE WORD, WHICH ORDINARIL Y 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 UNDERSTOOD TO MEAN THAT WHICH MAY, CAN O R SHOULD BE PAID AND IS HELD EQUIVALENT TO 'DUE'. 23. DESPITE THIS NARROW INTERPRETATION OF SECTION 40(A)(IA), THE QUESTION STILL SURVIVES IF THE TRIBUNAL IN CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUP RA) 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 PART OF THE PARLIAMENT. BOTH THESE ASPE CTS WE WOULD ADDRESS ONE AFTER ANOTHER. IF ONE LOOKS CLOSE LY TO 22 THE PROVISION, IN QUESTION, ADVERSE CONSEQUENCES OF NOT BEING ABLE TO CLAIM DEDUCTION ON CERTAIN PAYMENTS 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, RENT, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FE ES FOR TECHNICAL SERVICES PAYABLE TO RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUBCONTRACTOR BEING RESIDENT FOR CARRYING OUT ANY WORK. (B) THESE AMOUNTS ARE SUCH ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B. (C) SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTI ON HAS NOT BEEN PAID ON OR BEFORE DUE DATE SPECIFIED I N 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 THAT THERE SHOULD BE AN AMOUNT PAYABLE IN THE NATURE DES CRIBED ABOVE, WHICH IS SUCH ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B BUT SUCH TAX HAS NOT BEEN DEDUCTED OR IF DEDUCTED NOT PAID BEFORE THE DUE DATE. THIS PROV ISION NOWHERE REQUIRES THAT THE AMOUNT WHICH IS PAYABLE M UST REMAIN SO PAYABLE THROUGHOUT DURING THE YEAR. TO REITERATE 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 BOUN D TO INTERPRET SUCH REQUIREMENTS STRICTLY. SUCH REQUIREM ENTS, HOWEVER, CANNOT BE ENLARGED BY ANY ADDITION OR SUBT RACTION 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 F OR CARRYING 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 INTENDED TO BRING ABOUT ANY SUCH DISTINCTION NOR THE LANGUAGE USED IN THE SECTION BRINGS ABOUT ANY SUCH MEANING. IF THE INTER PRETATION AS ADVANCED BY THE ASSESSEES IS ACCEPTED, IT WOULD LEAD TO A SITUATION WHERE THE ASSESSEE WHO THOUGH WAS REQUIRE D TO DEDUCT THE TAX AT SOURCE BUT NO SUCH DEDUCTION WAS MADE OR MORE FLAGRANTLY DEDUCTION THOUGH MADE IS NOT PAID TO THE GOVERNMENT, WOULD ESCAPE THE CONSEQUENCE ONLY BECAU SE THE AMOUNT WAS ALREADY PAID OVER BEFORE THE END OF THE YEAR IN CONTRAST TO ANOTHER ASSESSEE WHO WOULD OTHERWISE BE IN SIMILAR SITUATION BUT IN WHOSE CASE THE AMOUNT REMA INED PAYABLE TILL THE END OF THE YEAR. WE SIMPLY DO NOT SEE ANY LOGIC WHY THE LEGISLATURE WOULD HAVE DESIRED TO BRI NG ABOUT SUCH IRRECONCILABLE AND DIVERSE CONSEQUENCES. WE HA STEN TO ADD THAT THIS IS NOT THE PRIME BASIS ON WHICH WE HA VE ADOPTED THE INTERPRETATION WHICH WE HAVE GIVEN. IF THE LANG UAGE USED BY THE PARLIAMENT CONVEYED SUCH A MEANING, WE WOULD NOT HAVE HESITATED IN ADOPTING SUCH AN INTERPRETATION. WE ONLY HIGHLIGHT THAT WE WOULD NOT READILY ACCEPT THAT THE LEGISLATURE DESIRED TO BRING ABOUT AN INCONGRUOUS AND SEEMINGLY IRRECONCILABLE CONSEQUENCES. THE DECISION OF THE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX, GU JARAT VS. 23 ASHOKBHAI CHIMANBHAI (SUPRA), WOULD NOT ALTER THIS SITUATION. THE SAID DECISION, OF COURSE, RECOGNIZES THE CONCEP T 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. HOWE VER, THIS DECISION NOWHERE INDICATES THAT THE EVENTS WHICH TAKE PLACE DURING THE ACCOUNTING PERIOD SHOULD BE IGNORE D AND THE ASCERTAINMENT OF FULFILLING A CERTAIN CONDITION PROVIDED UNDER THE STATUTE MUST BE JUDGED WITH REFERENCE TO LAST D ATE OF THE ACCOUNTING PERIOD. PARTICULARLY, IN THE CONTEXT OF REQUIREMENTS OF SECTION 40(A)(IA) OF THE ACT, WE SEE NO WARRANT IN THE SAID DECISION OF THE SUPREME COURT T O APPLY THE TEST OF PAYABILITY ONLY AS ON 31ST MARCH OF THE YEAR UNDER CONSIDERATION. MERELY BECAUSE, ACCOUNTS ARE CLOSED ON THAT DATE AND THE COMPUTATION OF PROFIT AND LOSS IS TO B E JUDGED WITH REFERENCE TO SUCH DATE, DOES NOT MEAN THAT WHE THER AN AMOUNT IS PAYABLE OR NOT MUST BE ASCERTAINED ON THE STRENGTH OF THE POSITION EMERGING ON 31ST MARCH. 25. THIS BRINGS US TO THE SECOND ASPECT OF THIS DISCUSSION, NAMELY, WHETHER THIS IS A CASE OF CONSC IOUS OMISSION AND THEREFORE, THE LEGISLATURE MUST BE SEE N TO HAVE DELIBERATELY BROUGHT ABOUT A CERTAIN SITUATION WHICH DOES NOT REQUIRE ANY FURTHER INTERPRETATION. THIS IS THE FUNDAMENTAL ARGUMENT OF THE TRIBUNAL IN THE CASE OF M/S. MERILY N SHIPPING & TRANSPORTS VS. ACIT(SUPRA) TO ADOPT A PARTICULAR VIEW. 26. WHILE INTERPRETING A STATUTORY PROVISION THE C OURTS HAVE OFTEN APPLIED HYDEN'S 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. IN THE CASE OF BENGAL IMMUNITY CO. LTD. VS. ST ATE OF BIHAR AND OTHERS REPORTED IN AIR 1955 SC 661, THE APEX COURT REFERRED TO THE FAMOUS ENGLISH DECISION IN HY DEN'S CASE WHEREIN WHILE ADOPTING RESTRICTIVE OR ENLARGING 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 COMMON LAW DID NOT PROVIDE. (3) WHAT REMEDY THE PARLIAMENT HAD RESOLVE D AND ADOPTED TO CURE 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 PA RLIAMENT, ITS DEBATES AND EVEN THE SPEECHES MADE BY THE PROPOSER OF A BILL ARE ORDINARILY NOT CONSIDERED AS RELEVANT OR SAFE TOOLS FOR INTERPRETATION OF A STATUTE. IN THE CASE OF ASWINI KU MAR CHOSE AND ANOTHER VS. ARABINDA BOSE AND ANOTHER REPORTED IN A.I.R. 1952 SC 369 IN A CONSTITUTION BENC H DECISION OF (CORAM: PATANJALI SASTRI, CJ.), OBSERVE D THAT:- '33. .....IT WAS URGED THAT ACCEPTANCE OR REJECTION OF AMENDMENTS TO A BILL IN THE COURSE OF PARLIAMENTARY PROCEEDINGS FORMS PART OF THE PRE-ENACTMENT HISTORY OF A STATUTE AND AS SUCH MIGHT THROW VALUABLE LIGHT ON T HE 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. 24 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 W ITH ANY REASONABLE DEGREE OF CERTAINTY. AND WHERE THE LEGISLATURE HAPPENS TO BE BICAMERAL, THE SECOND CHAMBER MAY OR MAY NOT HAVE KNOWN OF SUCH REASON WHEN IT DEALT WITH THE MEASURE. WE HOLD ACCORDINGLY THAT ALL THE THREE FORMS OF EXTRINSIC AID SOUGHT TO BE R ESORTED TO BY THE PARTIES IN THE CASE MUST BE EXCLUDED FROM CONSIDERATION IN ASCERTAINING THE TRUE OBJECT AND I NTENTION OF THE LEGISLATURE.' 29. IN YET ANOTHER CONSTITUTION BENCH JUDGMENT IN THE 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 U P FOR CONSIDERATION AT ALL OR NOT, A REFERENCE TO THE DEB ATES 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 UNDE R:- 173. WE DO NOT PROPOSE TO ENTER INTO ANY ELABORAT E DISCUSSION ON THE QUESTION WHETHER IT WOULD BE COMP ETENT TO US IN ARRIVING AT A PROPER CONSTRUCTION OF THE E XPRESSION 'FIXING RATES OF WAGES' TO LOOK INTO THE STATEMENT OF OBJECTS AND REASONS ATTACHED TO THE BILL NO. 13 OF 1955 AS INTRODUCED IN THE RAJYA SABHA OR THE CIRCUMSTANC ES UNDER WHICH THE WORD 'MINIMUM' CAME TO BE DELETED F ROM THE PROVISIONS OF THE BILL RELATING TO RATES OF WAG ES AND THE WAGE BOARD AND THE FACT OF SUCH DELETION WHEN THE A CT 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 PLAIN AND GRAMMATICAL MEAN ING (SEE: ASHVINI KUMAR GHOSH V. ARABINDA BOSE, 1953 SC R 1:(AIR 1952 SC 369) (Z24) AND PROVAT KUMAR KAR V. WILLIAM TREVELYAN CURTIEZ PARKER, AIR 1950 CAL 116 (Z25), IT IS ONLY WHEN THE TERMS OF THE STATUTE ARE AMBIGU OUS OR VAGUE THAT RESORT MAY BE HAD TO THEM FOR THE PURPOS E OF ARRIVING AT THE TRUE INTENTION OF THE LEGISLATURE.' 31. IT CAN THUS BE SEEN THAT THE DEBATES IN THE PA RLIAMENT ARE ORDINARILY NOT CONSIDERED AS THE AIDS FOR INTERPRETATION OF THE ULTIMATE PROVISION WHICH MAY BE BROUGHT INTO TH E STATUTE. THE DEBATES AT BEST INDICATE THE OPINION OF THE INDIVIDUAL MEMBERS AND ARE ORDINARILY NOT RELIED UP ON FOR INTERPRETING THE PROVISIONS, PARTICULARLY WHEN THE PROVISIONS ARE PLAIN. WE ARE CONSCIOUS THAT DEPARTURE IS MADE IN TWO EXCEPTIONAL CASES, NAMELY, THE DEBATES IN THE CONST ITUENT 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 DRA FT BILL AND WHY THE PROVISION ULTIMATELY ENACTED CARRIED A DIFFERENT EXPRESSION CANNOT BE GATHERED FROM MERE COMPARISON OF THE TWO SETS OF PROVISIONS. THERE MAY BE VARIETY OF REA SONS WHY 25 THE ULTIMATE PROVISION MAY VARY FROM THE ORIGINAL D RAFT. IN THE PARLIAMENTARY SYSTEM, TWO HOUSES SEPARATELY DEBATE THE LEGISLATIONS UNDER CONSIDERATION. IT WOULD ALL THE MORE BE UNSAFE TO REFER TO OR RELY UPON THE DRAFTS, AMENDMENTS, DEBATES ETC FOR INTERPRETATION OF A STATUTORY PROVI SION WHEN THE LANGUAGE USED IS NOT CAPABLE OF SEVERAL MEANINGS. IN THE PRESENT CASE THE TRIBUNAL IN CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) FELL IN A SE RIOUS ERROR IN MERELY COMPARING THE LANGUAGE USED IN THE DRAFT BILL AND FINAL ENACTMENT TO ASSIGN A PARTICULAR MEANING TO T HE STATUTORY PROVISION. 32. IT IS, OF COURSE, TRUE THAT THE COURTS IN INDI A HAVE BEEN APPLYING THE PRINCIPLE OF DELIBERATE OR CONSCIOUS OMISSION. SUCH PRINCIPLE IS APPLIED MAINLY WHEN AN EXISTING P ROVISION IS AMENDED AND A CHANGE IS BROUGHT ABOUT. WHILE INTERPRETING SUCH AN AMENDED PROVISION, THE COURTS WOULD IMMEDIA TELY INQUIRE WHAT WAS THE STATUTORY PROVISION BEFORE AND WHAT CHANGES THE LEGISLATURE BROUGHT ABOUT AND COMPARE THE EFFECT OF THE TWO. THE OTHER OCCASION FOR APPLYING THE PRINCIPLE, WE NOTICE FROM VARIOUS DECISIONS OF THE SUPREME COURT, HAS BEEN WHEN THE LANGUAGE OF THE LEGISLATUR E IS COMPARED WITH SOME OTHER ANALOGOUS STATUTE OR OTHER PROVISIONS OF THE SAME STATUTE OR WITH EXPRESSION W HICH COULD APPARENTLY OR OBVIOUSLY BEEN USED IF THE LEGISLATUR E HAD DIFFERENT INTENTION IN MIND, WHILE FRAMING THE PROV ISION. WE MAY REFER TO SOME OF SUCH DECISIONS PRESENTLY. IN THE CASE OF BHUWALKA STEEL INDUSTRIES LTD. VS. BOMBAY IRON AN D 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 LEGISLATURE, ONLY WITH THE OBJECTIVE TO PROVIDE PRO TECTION TO ALL THE LABOURERS OR WORKERS, WHO WERE THE MANUAL WORKE RS 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 DEFI NITION AND ONCE WE ACCEPT THIS, ALL THE ARGUMENTS REGARDING TH E OBJECTS AND REASONS, THE COMMITTEE REPORTS, THE LEGISLATIVE HISTORY BEING CONTRARY TO THE EXPRESS LANGUAGE, ARE RELEGAT ED TO THE BACKGROUND AND ARE LIABLE TO BE IGNORED.' 33. IN THE CASE OF AGRICULTURAL PRODUCE MARKET COMMITTEE, NARELA, DELHI VS. COMMISSIONER OF INCOME TAX AND ANR. REPORTED IN AIR 2008 SC (SUPPLEMENT) 566 = (2008-TIOL-155-SC-IT), THE SUPREME COURT NOTICED THAT PRIOR TO FINANCE ACT, 2002, THE INCOME TAX ACT DID NOT CONTAIN THE DEFINITION OF WORDS 'LOCAL AUTHORITY'. THE WORD CAME TO BE DEFINED FOR THE FIRST TIME BY THE FINANC E ACT OF 2002 BY EXPLANATION/ DEFINITION CLAUSE TO SECTION 1 0(20) OF THE ACT. IT WAS FURTHER NOTICED THAT THERE WERE SIGNIFICANT DIFFERENCE IN THE DEFINITION OF TERM 'LOCAL AUTHORI TY' CONTAINED UNDER SECTION 3(31) OF THE GENERAL CLAUSE S ACT, 1987 AS COMPARED TO THE DEFINITION - CLAUSE INSERTE D IN SECTION 10(20) OF THE INCOME TAX ACT, 1961 VIDE FIN ANCE ACT, OF 2002. IN THIS CONTEXT IT WAS OBSERVED THAT:- '27. CERTAIN GLARING FEATURES CAN BE DECIPHERED FROM THE ABOVE COMPARATIVE CHART. UNDER SECTION 3(31) OF THE GENERAL CLAUSES ACT, 1897, 'LOCAL AUTHORITY' WAS DEFINED TO MEAN ' A MUNICIPAL COMMITTEE, DISTRICT BOARD, BODY OF PORT 26 COMMISSIONERS OR OTHER AUTHORITY LEGALLY ENTITLED T O THE CONTROL OR MANAGEMENT OF A MUNICIPAL OR LOCAL FUND. THE WORDS ' OTHER AUTHORITY' IN SECTION 3(31) OF THE 1897 ACT HAS BEEN OMITTED BY PARLIAMENT IN THE EXPLANATION/ 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 WO RD 'LOCAL AUTHORITY' IS BODILY LIFTED FROM SECTION 3(3 1) OF THE 1897 ACT AND INCORPORATED, BY PARLIAMENT, IN THE SAID EXPLANATION TO SECTION 10(20) OF THE 1961 ACT. THIS DELIBERATE OMISSION IS IMPORTANT.' 34. THE APEX COURT IN THE CASE OF GREATER BOMBAY COOPERATIVE 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 MEA NING OF 'BANKING COMPANY' DEFINED IN THE BANKING REGULATION 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 PARLIAMENT WAS FULLY AWARE THAT THE PROVISIONS OF THE BR ACT APPLY TO CO-OPERATIVE 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 ALTERED BY ACT NO.23 OF 1965 AND IT WAS KEPT INTACT, AND IN FACT ADDITIONAL DEFINITIONS WER E ADDED BY SECTION 56(C).'CO-OPERATIVE BANK' WAS SEPARATELY DEFINED BY THE NEWLY INSERTED CLAUSE (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 'BANKING COMPANY' MUST, THEREFORE, NECESSARILY BE STRICTLY CONFINED TO 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 'BANKING COMPANY' AS DEFINED IN SECTION 5(C) AND SHALL 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 COMMISSION OF CO-OPERATIVE BANKS FROM THE PURVIEW OF THE RDB ACT. THE REASON FOR EXCLUDING COOPERATIVE BANKS SEEMS TO BE THAT CO- OPERATIVE BANKS HAVE COMPREHENSIVE, SELF- CONTAINED AND LESS EXPENSIVE REMEDIES AVAILABLE TO THEM UNDER THE STATE CO-OPERATIVE SOCIETIES ACTS OF THE STATES CONCERNED, WHILE OTHER BANKS AND FINANCIAL INSTITUTIONS DID NOT HAVE SUCH SPEEDY REMEDIES AND THEY HAD TO FILE SUITS IN CIVIL COURTS.' 35. IN THE CASE OF NATIONAL MINERAL DEVELOPMENT CORPORATION LTD. VS. STATE OF M.P AND ANOTHER REPOR TED IN AIR 2004 SC 2456, THE APEX COURT OBSERVED AS UNDER: - 27 '29. THE PARLIAMENT KNOWING IT FULL WELL THAT THE IRON ORE SHALL HAVE TO UNDERGO A PROCESS LEADING TO EMERGENCE OF LUMPS, FINES, CONCENTRATES AND SLIMES CHOSE TO MAKE PROVISION FOR QUANTIFICATION OF ROYALTY ONLY BY REFERENCE TO THE QUANTITY OF LUMPS, FINES AND CONCENTRATES. IT LEFT SLIMES OUT O F CONSIDERATION. NOTHING PREVENTED THE PARLIAMENT FROM EITHER PROVIDING 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 UNTIL 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 EXTENDED MEANING TO 'FINES' FOR THE PURPOSE OF LEVY OF ROYALTY WHICH IT HAS CHOSEN NOT TO DO. IT IS CLEARLY SUGGESTIVE OF I TS INTENTION NOT TO TAKE INTO CONSIDERATION 'SLIMES' F OR QUANTIFYING THE AMOUNT OF ROYALTY. THIS DELIBERATE OMISSION OF PARLIAMENT CANNOT BE MADE GOOD BY INTERPRETATIVE PROCESS SO AS TO CHARGE ROYALTY ON 'SLIMES' BY READING SECTION 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 QUESTION WOULD STILL HAVE REMAINED AT WHAT RATE AND ON WHAT QUANTITY WHICH QUESTIONS CANNOT BE ANSWERED BY SECTION 9.' 36. IN THE CASE OF GOPAL SARDAR, VS. KARUNA SARDA R REPORTED IN AIR 2004 SC 3068, THE APEX . COURT IN 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 AN D LIMITATION ACT, 1963 APPLIED OR NOT, OBSERVED AS UN DER:- '8....PRIOR TO 15-2-1971, AN APPLICATION UNDER SECTION 8 WAS REQUIRED TO BE MADE TO THE 'REVENUE OFFICER SPECIFICALLY EMPOWERED BY THE STATE GOVERNMENT IN THIS BEHALF.' THIS PHRASE WAS SUBSTITUTED BY THE PHRASE 'MUNSIF HAVING TERRITORIA L JURISDICTION' BY THE AFOREMENTIONED AMENDMENT. EVEN AFTER THIS AMENDMENT WHEN AN APPLICATION IS REQUIRED TO BE MADE TO SECTION 8 OF THE ACT EITHER TO APPLY SECTION 5 OF THE LIMITATION ACT OR ITS PRINCIPLES SO AS TO ENABLE A PARTY TO MAKE AN APPLICATION AFTER THE EXPIRY OF THE PERIOD OF LIMITATION PRESCRIBED ON SHOWING SUFFICIENT 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 PROVIDING FOR CONDONATION OF DELAY. THUS, WHEN SECTION 5 OF THE LIMITATION ACT IS NOT MADE APPLICABLE TO THE PROCEEDINGS UNDER SECTION 8 OF THE ACT UNLIKE TO THE OTHER PROCEEDINGS UNDER THE ACT, AS ALREADY STATED ABOVE, IT IS APPROPRIATE TO CONSTRUE THAT TH E PERIOD OF LIMITATION PRESCRIBED UNDER SECTION 8 OF THE ACT SPECIFICALLY AND EXPRESSLY GOVERNS AN APPLICATION TO BE MADE UNDER THE SAID SECTION AND NOT THE PERIOD PRESCRIBED UNDER ARTICLE 137 OF THE LIMITATION ACT.' 37. IN OUR OPINION, THE TRIBUNAL COMMITTED AN ERRO R IN APPLYING THE PRINCIPLE OF CONSCIOUS OMISSION IN THE PRESENT 28 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 PROVISION IS AMPLY CLEAR. 38. IN THE RESULT, WE ARE OF THE OPINION THAT SECT ION 40(A) (IA) WOULD COVER NOT ONLY TO THE AMOUNTS WHICH ARE PAYABLE AS ON 31TH MARCH OF A PARTICULAR YEAR BUT A LSO WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. OF COURSE, AS LONG AS THE OTHER REQUIREMENTS OF THE SAID PROVI SION ' EXIST. IN THAT CONTEXT, IN OUR OPINION THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA), DOES NOT LA Y 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. 40. ALL TAX APPEALS ARE ALLOWED. DECISIONS OF THE TRIBUNAL UNDER CHALLENGE ARE REVERSED. IN THE EARLI ER PORTION OF THE JUDGMENT, WE HAD RECORDED THAT THE T RIBUNAL IN ALL CASES HAD PROCEEDED ONLY ON THIS SHORT BASIS WITHOUT ADDRESSING OTHER ISSUES. WE, THEREFORE, PLACE ALL T HESE MATTERS BACK BEFORE THE TRIBUNAL FOR FRESH CONSIDER ATION OF OTHER ISSUES, IF ANY, REGARDING DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. ALL APPEALS ARE DISPOSED OF ACCORDINGLY. 8.3 HOWEVER, WE FIND ALTHOUGH THE ABOVE 2 DECISIONS WERE RENDERED PRIOR TO THE HEARING BEFORE THE HONBLE AL LAHABAD HIGH COURT THE SAME WERE NOT BROUGHT TO THE NOTICE OF TH E HONBLE BENCH AND THE BENCH RELYING ON THE DECISION OF THE SPECIA L BENCH IN THE CASE OF MERILYN SHIPPING AND TRANSPORT LTD. (SUPRA) UPHELD THE DECISION OF THE TRIBUNAL. UNDER THESE CIRCUMSTANCE S, FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT AND HON BLE CALCUTTA HIGH COURT (SUPRA) WE UPHOLD THE ORDER OF THE CIT(A ) SUSTAINING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. WE FUR THER FIND THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF AC IT VS. SHRI BHARAT DHANPAL PATIL VIDE ITA NO.600/PN/2012 ORDER DATED 30-07- 2013 FOLLOWING THE DECISION OF HONBLE CALCUTTA HIG H COURT AND GUJARAT HIGH COURT CITED (SUPRA) HAD ALLOWED THE AP PEAL FILED BY THE REVENUE WHEREIN THE CIT(A) HAD HELD THAT PROVISIONS OF SECTION 40(A)(IA) WOULD APPLY WHEN THE AMOUNT IS PAYABLE AN D WHERE THE EXPENDITURE IS PAID. THE ARGUMENT OF THE LD.COUNSE L FOR THE ASSESSEE THAT WHEN TWO VIEWS ARE POSSIBLE THE VIEW FAVOURABLE TO THE ASSESSEE HAS TO BE FOLLOWED IN VIEW OF THE DECI SION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETA BLE PRODUCTS LTD.(SUPRA) IS NOT APPLICABLE TO THE FACTS AND CIRC UMSTANCES OF THE PRESENT CASE. IN THIS VIEW OF THE MATTER, WE UPHOL D THE ORDER OF THE CIT(A) AND THE GROUNDS RAISED BY THE ASSESSEE ARE D ISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 29 5. FOLLOWING THE AFORESAID PRECEDENT, WE HEREBY AFF IRM THE ORDER OF THE CIT(A) SUSTAINING THE DISALLOWANCE OF RS.6,23,861/- U/S.40(A)(IA) OF THE ACT. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED ON 18 TH FEBRUARY, 2015. SD/- SD/- (SUSHMA CHOWLA ) ( G.S.PANNU ) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH/SUJEET PUNE, DATED 18 TH FEBRUARY, 2015 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-I, NASHIK. 4. THE CIT-I, NASHIK. 5. THE DR B BENCH, PUNE. 6. GUARD FILE BY ORDER //TRUE COPY// ASSISTANT REGISTRAR, ITAT, PUNE BENCHES, PUNE