M/s.Hameed & Co.(Engineers) P.Ltd, Malappuram V. The DCIT, Tirur

ITA 235/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81343 (ITAT-COCHIN)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 19-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 22-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: C B M WARRIER
• Section: 143(3); 147

Judgement Text

1 ITA NO. 767/COCH/2013 ITA NO.235/COCH/2014 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI CHANDRA PO OJARI (AM) I.T.A NO. 767/COCH/2013 (ASSESSMENT YEAR 2007-08) & I.T.A NO.235/COCH/2014 (ASSESSMENT YEAR 2007-08) M/S HAMEED & COMPANY (ENGINEERS) VS ACIT, CIR.2(2) PVT LTD, KADALUNDI NAGARAM (PO) TIRUR MALAPPURAM PAN : AAACH8652E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI CBM WARRIER RESPONDENT BY : SHRI M ANIL KUMAR, CIT DATE OF HEARING : 19-08-2014 DATE OF PRONOUNCEMENT : 17-10-2014 O R D E R PER N.R.S. GANESAN (JM) BOTH THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAI NST THE RESPECTIVE ORDERS OF THE CIT(A) FOR THE ASSESSMENT YEAR 2007-0 8. ITA NO.767/COCH/2013 ARISES OUT OF THE ORDER PASSED U/S 143(3) WHEREAS ITA NO.235/COCH/2014 ARISES OUT OF THE ORDER PASSED BY THE ASSESSING OFFICER ON RE-ASSESSMENT U/S 147 OF THE ACT. 2 ITA NO. 767/COCH/2013 ITA NO.235/COCH/2014 2. SHRI CBM WARRIER, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERATION IS WIT H REGARD TO DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT. THE LD.REPRESENTATI VE SUBMITTED THAT THE ASSESSEE IS NOT DISPUTING THE LIABILITY TO DEDUCT T AX. ACCORDING TO THE LD.REPRESENTATIVE, PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE IN RESPECT OF THE AMOUNT ALREADY PAID. REFERRING TO S ECTION 40(A)(IA), THE LD.REPRESENTATIVE SUBMITTED THAT ONLY IN RESPECT OF THE AMOUNT PAYABLE AS ON THE LAST DATE OF THE FINANCIAL YEAR; THE PROVISI ONS OF SECTION 40(A)(IA) COULD BE INVOKED. IN THESE CASES, ADMITTEDLY, THE AMOUNT WAS PAID WITHOUT MAKING ANY DEDUCTION OF TAX, THEREFORE, ACCORDING T O THE LD.REPRESENTATIVE, NO DISALLOWANCE IS CALLED FOR. THE LD.REPRESENTATI VE PLACED HIS RELIANCE ON THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN MERILYN SHIPPING & TRANSPORTS VS ADDL CIT (2012) 70 DTR 81 (VIZAG) AND SUBMITTED THAT A SIMILAR VIEW WAS TAKEN BY THE ALLAHABAD HIGH COURT IN CIT VS M/S VECTOR SHIPPING SERVICES (P) LTD I.T.A NO.122 OF 2013 JUDG MENT DATED 09-07- 2013. ON APPEAL BY THE REVENUE, ACCORDING TO THE L D.REPRESENTATIVE, THE APEX COURT DISMISSED THE SPECIAL LEAVE PETITION AND THEREBY THE JUDGMENT OF THE ALLAHABAD HIGH COURT WAS CONFIRMED. 3. WE HEARD SHRI M ANIL KUMAR, THE LD.DR ALSO. ACC ORDING TO THE LD.DR, SECTION 40(A)(IA) IS APPLICABLE IN RESPECT O F AMOUNTS PAID AND 3 ITA NO. 767/COCH/2013 ITA NO.235/COCH/2014 PAYABLE, THEREFORE, THE CIT(A) HAS RIGHTLY CONFIRME D THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LIAB ILITY TO DEDUCT TAX ON THE PAYMENT MADE BY THE ASSESSEE IS NOT IN DISPUTE. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS NOT MADE ANY DEDUCTION OF TAX AT THE TIME OF PAYMENT. THE ONLY OBJECTION OF THE ASSESSEE IS THA T SINCE THE AMOUNT HAS ALREADY BEEN PAID, THE PROVISIONS OF SECTION 40(A)( IA) ARE NOT APPLICABLE. THE CONTENTION OF THE ASSESSEE APPEARS TO BE BY REF ERRING TO THE WORD PAYABLE IN SECTION 40(A)(IA) OF THE ACT. NO DOUB T, THE SPECIAL BENCH AT VISHAKHAPATNAM IN MERILYN SHIPPING & TRANSPORTS (SU PRA) CONSIDERED THIS ISSUE AND BY MAJORITY OPINION FOUND THAT SECTION 40 (A)(IA) IS APPLICABLE ONLY IN RESPECT OF THE AMOUNT WHICH REMAINS TO BE PAYABL E ON THE LAST DATE OF THE FINANCIAL YEAR AND IS NOT APPLICABLE IN RESPECT OF THE AMOUNT WHICH WAS ALREADY PAID. 5. THE CALCUTTA HIGH COURT IN THE CASE OF CRESCENT EXPORTS SYNDICATE & ANOTHER IN ITA NO 20 OF 2013 AND GA 190 OF 2013 J UDGMENT DATED 03- 04-2013 HAD AN OCCASION TO EXAMINE THE CORRECTNESS OF THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN MERILYN SHIPPING & TRANSPORTS (SUPRA). 4 ITA NO. 767/COCH/2013 ITA NO.235/COCH/2014 AFTER CONSIDERING THE DECISION OF THE SPECIAL BENCH IN MERILYN SHIPPING & TRANSPORTS (SUPRA), THE CALCUTTA HIGH COURT FOUND T HAT THE SPECIAL BENCH IS NOT CORRECT IN CONFINING THE DISALLOWANCE ONLY T O THE AMOUNTS REMAINED TO BE PAID. THE CALCUTTA HIGH COURT SPECIFICALLY F OUND THAT SECTION 40(A)(IA) IS APPLICABLE IN RESPECT OF THE AMOUNTS P AID AND PAYABLE. THEREFORE, THE DECISION OF THE SPECIAL BENCH OF THI S TRIBUNAL WAS FOUND TO BE NOT CORRECT. 6. THE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIK ANDARKHAN N TUNVAR ITA NOS 905 OF 2012, 709 & 710 OF 2012, 333 OF 2013, 832 OF 2012, 857 OF 2012, 894 OF 2012, 928 OF 2012, 12 OF 2013, 51 OF 2013, 58 OF 2013 AND 218 OF 2013 JUDGMENT DATED 02-05-2013 ALSO HAD EXAMINED THE CORRECTNESS OF THE SPECIAL BENCH DECISION IN MERILY N SHIPPING & TRANSPORTS (SUPRA). THE GUJARAT HIGH COURT AFTER C ONSIDERING ALL THE RELEVANT FACTS AND THE REASONING GIVEN BY THE SPECI AL BENCH IN MERILYN SHIPPING & TRANSPORTS (SUPRA) FOUND THAT THE DECISI ON OF THE SPECIAL BENCH OF THIS TRIBUNAL IN MERILYN SHIPPING & TRANSPORTS ( SUPRA) DOES NOT EXPRESS THE CORRECT POSITION OF LAW. 5 ITA NO. 767/COCH/2013 ITA NO.235/COCH/2014 7. IN VIEW OF THE ABOVE, THE DECISION OF THE SPECIA L BENCH OF THIS TRIBUNAL AT VISAKHAPATNAM IN MERILYN SHIPPING & TRA NSPORTS (SUPRA) MAY NOT BE APPLICABLE TO THE FACTS OF THE CASE. 8. THE ALLAHABAD HIGH COURT IN CIT VS M/S VECTOR SH IPPING SERVICES (P) LTD I.T.A NO.122 OF 2013 JUDGMENT DATED 09-07-2 013 CONSIDERED THIS ISSUE. HOWEVER, WITHOUT MUCH OF DISCUSSION, REFERR ING TO THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL AT VISAKHAPATNAM IN MERILYN SHIPPING & TRANSPORTS (SUPRA), THE ALLAHABAD HIGH COURT UPHELD THE CONTENTION OF THE ASSESSEE. THE MUMBAI BENCH OF THIS TRIBUNAL IN ACI T VS RISHTI STOCK & SHARE PVT LTD ITA NO.112/MUM/2012 DATED 02-08-2013 EXAMINED ALL THE THREE JUDGMENTS OF THE HIGH COURTS, VIZ. GUJARAT HI GH COURT IN SIKANDARKHAN N TUNVAR (SUPRA), CALCUTTA HIGH COURT IN CRESCENT EXPORTS SYNDICATE & ANOTHER (SUPRA) AND THE ALLAHABAD HIGH COURT IN M/S VECTOR SHIPPING SERVICES (P) LTD (SUPRA) AND FOUND THAT TH E JUDGMENT OF THE ALLAHABAD HIGH COURT IN M/S VECTOR SHIPPING SERVICE S (P) LTD (SUPRA) IS AN OBITER DICTA , THEREFORE, IT IS NOT A RATIO DECIDENDI. NOW IT IS APPARENT THAT THERE ARE CONFLICTING JUDICIAL OPINIONS AMONGST THE CALCUTTA HIGH COURT AND GUJARAT HIGH COURT ON ONE SIDE AND THE ALLAHABAD HI GH COURT ON THE OTHER SIDE. UNDER NORMAL CIRCUMSTANCES, WHEN THERE ARE C ONFLICTING JUDICIAL OPINIONS, IT IS A PRACTICE TO FOLLOW THE VIEW WHICH IS FAVOURABLE TO THE 6 ITA NO. 767/COCH/2013 ITA NO.235/COCH/2014 ASSESSEE. IT IS ALSO SETTLED PRINCIPLES OF LAW THA T WHEN THERE ARE CONFLICTING JUDGMENTS, THE JUDGMENT WHICH GIVES MORE REASONS HA S TO BE PREFERRED THAN THE ONE WHICH DOES NOT GIVE REASONS. IN THIS CASE, GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR (SUPRA), CALCUTTA HI GH COURT IN CRESCENT EXPORTS SYNDICATE & ANOTHER (SUPRA) GIVE MORE ELABO RATE REASONS. FOR THE PURPOSE OF CONVENIENCE WE ARE REPRODUCING BELOW THE RELEVANT PARAGRAPHS OF THE JUDGMENTS OF GUJARAT HIGH COURT IN SIKANDARK HAN N TUNVAR (SUPRA), AND THE CALCUTTA HIGH COURT IN CRESCENT EXPORTS SYN DICATE & ANOTHER (SUPRA): CALCUTTA HIGH COURT IN CRESCENT EXPORTS SYNDICATE & ANOTHER (SUPRA) BEFORE DEALING WITH THE SUBMISSIONS OF THE LEARNE D COUNSEL APPEARING FOR THE ASSESSEES IN BOTH THE APP EALS WE HAVE TO EXAMINE THE CORRECTNESS OF THE MAJORITY VIE WS IN THE CASE OF MERILYN SHIPPING. WE ALREADY HAVE QUOTED EXTENSIVELY BOTH THE MAJORI TY AND THE MINORITY VIEWS EXPRESSED IN THE AFORESAID C ASE. THE MAIN THRUST OF THE MAJORITY VIEW IS BASED ON THE FA CT THAT THE LEGISLATURE HAS REPLACED THE EXPRESSION AMOUNTS CR EDITED OR PAID WITH THE EXPRESSION PAYABLE IN THE FINAL EN ACTMENT. COMPARISON BETWEEN THE PRE-AMENDMENT AND POST AMENDMENT LAW IS PERMISSIBLE FOR THE PURPOSE OF ASC ERTAINING THE MISCHIEF SOUGHT TO BE REMEDIED OR THE OBJECT SO UGHT TO BE ACHIEVED BY AN AMENDMENT. THIS IS PRECISELY WHAT W AS DONE 7 ITA NO. 767/COCH/2013 ITA NO.235/COCH/2014 BY THE APEX COURT IN THE CASE OF CIT VS. KELVINATOR REPORTED IN 2010(2) SCC 723. BUT THE SAME COMPARISON BETWEEN T HE DRAFT AND THE ENACTED LAW IS NOT PERMISSIBLE. NOR CAN THE DRAFT OR THE BILL BE USED FOR THE PURPOSE OF REGULATING T HE MEANING AND PURPORT OF 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 REA LIZING 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 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) OF 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 ASSESSEE DOES NOT DEDUCT TDS ON SUCH EXPENSES ARE DISALLOWED . HAVING HELD SO WAS IT OPEN TO THE TRIBUNAL TO SEEK TO JUSTIFY THAT THIS FICTION CANNOT BE EXTENDED ANY F URTHER AND, 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 LEARNED TRIBUNAL REALIZED THE MEANING AND PURPORT O F SECTION 8 ITA NO. 767/COCH/2013 ITA NO.235/COCH/2014 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 RIGOU R OF THE LAW BY HOLDING THAT THE DISALLOWANCE SHALL BE RESTRICTE D TO THE MONEY WHICH IS YET TO BE PAID. WHAT THE TRIBUNAL B Y 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 RE GARD MAY BE MADE TO THE JUDGMENT IN THE CASE OF BHUWALKA STEEL INDUSTRIES VS. BOMBAY IRON & STEEL LABOUR BOARD REPORTED IN 20 10(2) SCC 273. UNPROTECTED WORKER WAS FINALLY DEFINED IN SECTIO N 2(11) OF THE MATHADI ACT AS FOLLOWS:- UNPROTECTED WORKER MEANS A MANUAL WORKER WHO IS ENGAGED OR TO BE ENGAGED IN ANY SCHEDULED EMPLOYMEN T. THE CONTENTION RAISED WITH REFERENCE TO WHAT WAS T HERE IN THE BILL WAS REJECTED BY THE SUPREME COURT BY HO LDING AS 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 LEGISLAT ION FOR WELFARE AND BENEFITS OF THE LABOUR FORCE IN THE STATE, THE SE PRECISE WORDS WERE REMOVED BY THE LEGISLATURE AND THE DEFIN ITION WAS MADE 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 GAZETTE EXTRAORDINARY, PART IV ON 13-06-1969, THE AFOREMENT IONED 9 ITA NO. 767/COCH/2013 ITA NO.235/COCH/2014 WORDS WERE OMITTED. THEREFORE, T HIS WOULD BE A CL EAR POINTER TO THE LEGISLATIVE INTENT THAT THE LEGISLATURE BEIN G CONSCIOUS OF THE FACT AND BEING ARMED WITH ALL THE COMMITTEE REP ORTS AND ALSO BEING ARMED WITH THE FACTUAL DATA, DELIBERATEL Y AVOIDED THOSE WORDS. WHAT THE APPELLANTS ARE ASKING WAS TO READ IN THAT DEFINITION, THESE PRECISE WORDS, WHICH WERE CO NSCIOUSLY AND DELIBERATELY OMITTED FROM THE DEFINITION. THAT WOULD AMOUNT TO SUPPLYING THE CASUS OMISSUS AND WE DO NOT THINK THAT IT IS POSSIBLE, PARTICULARLY, IN THIS CASE. T HE LAW OF SUPPLYING THE CASUS OMISSUS BY THE COURTS IS EXTREM ELY CLEAR AND SETTLED THAT THOUGH THIS COURT MAY SUPPLY THE C ASUS OMISSUS, IT WOULD BE IN THE RAREST OF THE RATE CASE AND THUS SUPPLYING OF THIS CASUS OMISSUS WOULD BE EXTREMELY NECESSARY DUE TO THE INADVERTENT OMISSION ON THE PA RT OF THE LEGISLATURE. BUT, THAT IS CERTAINLY NOT THE CASE H ERE. 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 EXPENSES ARE SO UGHT TO BE DISALLOWED? THE ANSWER IS BOUND TO BE THOSE EXPEN SES ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVI I-B. ONCE THIS IS REALIZED NOTHING TURNS ON THE BASIS OF THE FACT THAT THE LEGISLATURE USED THE WORD PAYABLE AND NOT PAID O R CREDITED. UNLESS ANY AMOUNT IS PAYABLE, IT CAN NEITHER BE PAI D NOR CREDITED. IF N AMOUNT HAS NEITHER BEEN PAID NOR CR EDITED, THERE CAN BE NO OCCASION FOR CLAIMING ANY DEDUCTION. 10 ITA NO. 767/COCH/2013 ITA NO.235/COCH/2014 THE LANGUAGE USED IN THE DRAFT WAS UNCLEAR AND SUSCEPTIBLE TO GIVING MORE THAN ONE MEANING. BY LO OKING AT THE DRAFT IT COULD BE SAID THAT THE LEGISLATURE WAN TED TO TREAT THE PAYMENTS MADE OR CREDITED IN FAVOUR OF A CONTRACTOR OF SUB- CONTRACTOR DIFFERENTLY THAN THE PAYMENTS ON ACCOUNT OF INTEREST, COMMISSION OR BROKERAGE, FEES FOR PROFESSIONAL SERV ICES OR FEES FOR TECHNICAL SERVICES BECAUSE THE WORDS MOUN TS CREDITED OR PAID WERE USED ONLY IN RELATION TO A C ONTRACTOR OF SUB-CONTRACTOR. THIS DIFFERENTIAL TREATMENT WAS NO T INTENDED. THEREFORE, THE LEGISLATURE PROVIDED THAT THE AMOUNT S, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER XVII-B PAYABLE O N ACCOUNT OF INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY , FEES 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 LEGISLATURE IN THE FINALLY ENACTED LAW IS CLEAR AND UNAMBIGUOUS WHEREAS THE LA NGUAGE USED IN THE BILL WAS AMBIGUOUS. A FEW WORDS ARE NOW NECESSARY TO DEAL WITH THE SUBMISSION OF MR. BAGCHI AND MS. ROYCHOWDHURI. THE RE CAN BE NO DENIAL THAT THE PROVISION IN QUESTION IS HARS H. BUT THAT IS NO GROUND TO READ THE SAME IN A MANNER WHICH WAS NO T INTENDED BY THE LEGISLATURE. THIS IS OUR ANSWER TO THE SUBMISSION OF MR. BAGCHI. THE SUBMISSION OF MR. ROYCHOWDHURI THAT THE SECOND PROVISO SOUGHT TO BECO ME EFFECTIVE FROM 1 ST APRIL, 2013 SHOULD BE HELD TO HAVE ALREADY BECOME OPERATIVE PRIOR TO THE APPOINTED DATE CANNOT ALSO BE 11 ITA NO. 767/COCH/2013 ITA NO.235/COCH/2014 ACCEDED TO FOR THE SAME REASON INDICATED ABOVE. TH E LAW WAS DELIBERATELY MADE HARSH TO SECURE COMPLIANCE OF THE PROVISIONS REQUIRING DEDUCTIONS OF TAX AT SOURCE. IT IS NOT THE CASE OF AN INADVERTENT ERROR. FOR THE REASONS DISCUSSED ABOVE, WE ARE OF THE OPI NION THAT THE MAJORITY VIEWS EXPRESSED IN THE CASE OF MERILYN SHIPPING & TRANSPORTS ARE NOT ACCEPTABLE. THE SUBMISSIONS ADV ANCED BY LEARNED ADVOCATES HAVE ALREADY 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 CO RRECT INTERPRETATION OF THE SAID PROVISION. SECONDLY, WH ETHER OUR SUCH UNDERSTANDING OF THE LANGUAGE USED BY THE LEGI SLATURE SHOULD WAVER ON THE PREMISE THAT AS PROPOUNDED BY T HE TRIBUNAL, THIS WAS A CASE OF CONSCIOUS OMISSION ON THE PART OF THE PARLIAMENT. BOTH THESE ASPECTS WE WOULD ADDRES S ONE AFTER ANOTHER. IF ONE LOOKS CLOSELY TO THE PROVISI ON, IN QUESTION, ADVERSE CONSEQUENCES OF NOT BEING ABLE TO CLAIM DED UCTION ON CERTAIN PAYMENTS IRRESPECTIVE OF THE PROVISIONS CON TAINED IN SECTIONS 30 TO 38 OF THE ACT WOULD FLOW IF THE FOLL OWING REQUIREMENTS ARE SATISFIED:- (A) THERE IS INTEREST, COMMISSION OR BROKERAGE, REN T, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICA L SERVICES 12 ITA NO. 767/COCH/2013 ITA NO.235/COCH/2014 PAYABLE TO RESIDENT OR AMOUNTS PAYABLE TO A CONTRAC TOR OR SUB-CONTRACTOR BEING RESIDENT FOR CARRYING 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 SUB-SE CTION (1) OF SECTION 39. FOR THE PURPOSE OF CURRENT DISCUSSION REFERENCE TO THE PROVISO IS NOT NECESSARY. 24. WHAT THIS SUB-SECTION, THEREFORE, REQUIRES IS T HAT THERE SHOULD BE AN AMOUNT PAYABLE IN THE NATURE DESCRIBED ABOVE, WHICH IS SUCH ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B BUT SUCH TAX HAS NOT BEEN DEDUCTED O R IF DEDUCTED NOT PAID BEFORE THE DUE DATE. THIS PROVIS ION NOWHERE REQUIRES THAT THE AMOUNT WHICH IS PAYABLE M UST REMAIN SO PAYABLE THROUGHOUT DURING THE YEAR. TO R EITERATE 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 BOU ND TO INTERPRET SUCH REQUIREMENTS STRICTLY. SUCH REQUIRE MENTS, HOWEVER, CANNOT BE ENLARGED BY ANY ADDITION OR SUBT RACTION OF WORDS NOT USED BY THE LEGISLATURE. THE TERM USED I S 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 A MOUNT MUST CONTINUE TO REMAIN PAYABLE TILL THE END OF THE ACCOUNTING YEAR. ANY SUCH INTERPRETATION WOULD REQUIRE READIN G WORDS WHICH THE LEGISLATURE HAS NOT USED. NO SUCH INTERP RETATION 13 ITA NO. 767/COCH/2013 ITA NO.235/COCH/2014 WOULD EVEN OTHERWISE BE JUSTIFIED BECAUSE IN OUR OP INION, THE LEGISLATURE COULD NOT HAVE INTENDED TO BRING ABOUT ANY SUCH DISTINCTION NOR THE LANGUAGE USED IN THE SECTION BR INGS ABOUT ANY SUCH MEANING. IF THE INTERPRETATION S ADVANCED BY THE ASSESSEES IS ACCEPTED, IT WOULD LEAD TO A SITUATION WHERE THE ASSESSEE THOUGH WAS REQUIRED TO DEDUCT THE TAX AT S OURCE BUT NO SUCH DEDUCTION WAS MADE OR MORE FLAGRANTLY DEDUC TION THOUGH MADE IS NOT PAID TO THE GOVERNMENT, WOULD ES CAPE THE CONSEQUENCE ONLY BECAUSE THE AMOUNT WAS ALREADY PAI D OVER BEFORE THE END OF THE YEAR IN CONTRAST TO ANOTHER A SSESSEE WHO WOULD OTHERWISE BE IN SIMILAR SITUATION BUT IN WHOSE CASE THE AMOUNT REMAINED PAYABLE TILL THE END OF THE YEA R. WE SIMPLY DO NOT SEE ANY LOGIC WHY THE LEGISLATURE WOU LD HAVE DESIRED TO BRING ABOUT SUCH IRRECONCILABLE AND DIVE RSE CONSEQUENCES. WE HASTEN TO ADD THAT THIS IS NOT TH E PRIME BASIS ON WHICH WE HAVE ADOPTED THE INTERPRETATION W HICH WE HAVE GIVEN. IF THE LANGUAGE USED BY THE PARLIAMENT CONVEYED SUCH A MEANING, WE WOULD NOT HAVE HESITATED IN ADOP TING SUCH AN INTERPRETATION. WE ONLY HIGHLIGHT THT WE W OULD NOT READILY ACCEPT THAT THE LEGISLATURE DESIRED TO BRIN G 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 A ND LOSS FROM THE BUSINESS OR PROFESSION WITH REFERENCE TO A CERT AIN PERIOD I.E. THE ACCOUNTING YEAR. IN THIS CONTEXT, LAST DA TE OF SUCH ACCOUNTING PERIOD WOULD ASSUME CONSIDERABLE SIGNIFI CANCE. 14 ITA NO. 767/COCH/2013 ITA NO.235/COCH/2014 HOWEVER, THIS DECISION NOWHERE INDICATES THAT THE E VENTS WHICH TAKE PLACE DURING THE ACCOUNTING PERIOD SHOUL D BE IGNORED AND THE ASCERTAINMENT OF FULFILLING A CERTA IN CONDITION PROVIDED UNDER THE STATUTE MUST BE JUDGED WITH REFE RENCE TO LAST DATE OF THE ACCOUNTING PERIOD. PARTICULARLY, IN THE CONTEXT OF REQUIREMENTS F 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 31 ST 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 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 DEL IBERATELY BROUGHT ABOUT A CERTAIN SITUATION WHICH DOES NOT RE QUIRE ANY FURTHER INTERPRETATION. THIS IS THE FUNDAMENTAL AR GUMENT OF THE TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) TO ADOPT A PARTICULAR VIEW. 26. WHILE INTERPRETING A STATUTORY PROVISION THE CO URTS HAVE OFTEN APPLIED HYDENS RULE OR THE MISCHIEF RULE AND ASCERTAINED WHAT WAS THE POSITION BEFORE THE AMENDMENT, WHAT TH E AMENDMENT SOUGHT TO REMEDY AND WHAT WAS THE EFFECT OF THE CHANGES. 27 TO 36.. 37. IN OUR OPINION, THE TRIBUNAL COMMITTED AN ERROR IN APPLYING THE PRINCIPLE OF CONSCIOUS OMISSION IN THE PRESENT 15 ITA NO. 767/COCH/2013 ITA NO.235/COCH/2014 CASE. FIRSTLY, AS ALREADY OBSERVED, WE HAVE SERIOU S DOUBT WHETHER SUCH PRINCIPLE CAN BE APPLIED BY COMPARING THE DRAFT PRESENTED IN PARLIAMENT AND ULTIMATE LEGISLATION WH ICH MAY BE PASSED. SECONDLY, THE STATUTORY PROVISIONS IS AMPL Y 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 31 ST MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYA BLE AT ANY TIME DURING THE YEAR. OF COURSE, AS LONG AS TH E OTHER REQUIREMENT OF THE SAID PROVISION EXIST. IN THAT C ONTEXT, IN OUR OPINION THE DECISION OF THE SPECIAL BENCH OF THE TR IBUNAL IN THE CASE OF M/S MERILYN SHIPPING & TRANSPORTS VS ACIT (SUPRA), DOES NOT LAY DOWN CORRECT LAW. 9. IN VIEW OF THE ABOVE, THIS TRIBUNAL HAS TO NECES SARILY FOLLOW THE JUDGMENTS RENDERED BY THE GUJARAT HIGH COURT IN SIK ANDARKHAN N TUNVAR (SUPRA), CALCUTTA HIGH COURT IN CRESCENT EXPORTS SY NDICATE & ANOTHER (SUPRA). 10. NOW COMING TO THE DISMISSAL OF SPECIAL LEAVE PE TITION BY THE SUPREME COURT, IT IS WELL SETTLED PRINCIPLES OF LAW THAT DISMISSAL OF SPECIAL LEAVE PETITION IS NOT THE LAW LAID DOWN BY THE APEX COURT. WHAT IS BINDING IS THE LAW LAID DOWN BY THE APEX COURT UNDER ARTICL E 141 OF THE CONSTITUTION OF INDIA. A MERE DISMISSAL BY ONE WORD, THE APEX C OURT DOES NOT LAY DOWN 16 ITA NO. 767/COCH/2013 ITA NO.235/COCH/2014 ANY LAW. THEREFORE, THE CONTENTION OF THE ASSESSEE THAT THE APEX COURT APPROVED THE JUDGMENT OF THE ALLAHABAD HIGH COURT I N M/S VECTOR SHIPPING SERVICES (P) LTD (SUPRA) IS NOT CORRECT. ACCORDING LY, BY FOLLOWING THE JUDGMENTS RENDERED BY THE GUJARAT HIGH COURT IN SIK ANDARKHAN N TUNVAR (SUPRA), CALCUTTA HIGH COURT IN CRESCENT EXPORTS SY NDICATE & ANOTHER (SUPRA), THE ORDERS OF THE LOWER AUTHORITIES ARE CO NFIRMED. 11. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH OCTOBER, 2014. SD/- SD/- (CHANDRA POOJARI) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 17 TH OCTOBER, 2014 PK/- COPY TO: 1. M/S HAMEED & CO (ENGINEERS) PVT LTD, KADALUNDI N AGARAM (PO), MALAPPURAM 2. THE ACIT, CIR.2(2), TIRUR 3. THE COMMISSIONER OF INCOME-TAX, KOZHIKODE 4. THE COMMISSIONER OF INCOME-TAX(A), KOZHIKODE 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH