The Kasargod Dist. Co-op Bank Ltd, Kasargode V. The DCIT, Kannur

ITA 245/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81394 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 30-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Keywords: Charitable institution
• Section: 201(1); 11

Judgement Text

1 ITA NO.245/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. 245/COCH/2014 (ASSESSMENT YEAR 2009-10) THE KASARGOD DISTRICT CO-OPERATIVE VS DY.CIT, CIR .1 BANK LTD, KASARGOD 671 121 KANNUR PAN : AAAAT3167G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GEORGE THOMAS RESPONDENT BY : SHRI K.K. JOHN, SR DR DATE OF HEARING : 13-10-2014 DATE OF PRONOUNCEMENT : 21-11-2014 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF CIT(A), KOZHIKODE DATED 05-02-2014 AND PERTAINS TO ASSESSME NT YEAR 2009-10. 2. SHRI GEORGE THOMAS, THE LD.REPRESENTATIVE FOR TH E ASSESSEE SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERAT ION IS DISALLOWANCE MADE BY THE ASSESSING OFFICER TO THE EXTENT OF RS. 2,25, 90,462 U/S 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TAX. 2 ITA NO.245/COCH/2014 3. SHRI GEORGE THOMAS, THE LD.REPRESENTATIVE SUBMIT TED THAT THE ASSESSEE PAID INTEREST ON THE DEPOSITS MADE BY THE FOLLOWING CONCERNS: NAME INTEREST PAID / CREDITED TAX DEDUCTIBLE KASARAGOD DIST CO-OP BANK EMPLOYEES WELFARE FUND 308913 31818 KERALA BUILDING & OTHER CONSTRUCTIONS WORKERS WELFARE BOARD 4175884 473128 KERALA CO-OP DEVELOPMENT & WELFARE FUND BOARD 19950 2055 KERALA HEAD LOAD WORKERS WELFARE BOARD 82872 8536 KERALA HEAD LOAD WORKERS WELFARE BOARD 139544 14373 KERALA STAFF CO-OP EMPLOYEES PENSION BOARD 11134502 1261539 KERALA STATE CO-OP EMPLOYEES WELFARE BOARD 1476197 167253 KERALA TODDY WORKERS WELFARE FUND BOARD 5212446 590570 THE SECRETARY CIRCLE CO-OP UNION, KASARAGOD 40153 4136 ACCORDING TO THE LD.REPRESENTATIVE, THESE CONCERNS WERE ESTABLISHED BY THE STATE GOVERNMENT UNDER A SPECIFIC LEGISLATION, THER EFORE, THEY ARE CORPORATE ENTITIES ELIGIBLE FOR EXEMPTION U/S 10(23C) OF THE ACT. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT IN FACT THE KERALA CO-OPERAT IVE EMPLOYEES PENSION BOARD FILED ITS RETURN OF INCOME DISCLOSING THE REC EIPT OF INCOME. THE KERALA BUILDING & OTHER CONSTRUCTIONS WORKERS WELFA RE BOARD AND KERALA TODDY WORKERS WELFARE FUND BOARD HAVE BEEN NOTIFIED U/S 10(23C) OF THE 3 ITA NO.245/COCH/2014 ACT FOR THE PURPOSE OF EXEMPTION. ACCORDING TO THE LD.REPRESENTATIVE, ONCE THE RECIPIENT ENTITIES ARE ENTITLED FOR EXEMPTION U /S 10(23C) THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX. 4. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT THE ASSESSEE HAS ALREADY PAID THE INTEREST. THE PROVISIONS OF SECTI ON 40(A)(IA) IS APPLICABLE ONLY IN RESPECT OF THE AMOUNTS REMAINS TO BE PAID A S ON THE LAST DAY OF THE FINANCIAL YEAR. THE LD.REPRESENTATIVE PLACED HIS R ELIANCE ON THE JUDGMENT OF THE ALLAHABAD HIGH COURT IN CIT VS VECTOR SHIPPI NG SERVICES (P) LTD (2013) 38 TAXMANN.COM 77 (ALLAHABAD) AND ALSO THE S PECIAL BENCH DECISION OF VISAKHAPATNAM BENCH OF THIS TRIBUNAL IN MERILYN SHIPPING & TRANSPORTS VS ADDL CIT (2012) 20 TAXMANN.COM 244 (V ISAKHAPATNAM). ACCORDING TO THE LD.REPRESENTATIVE, SINCE THE INTER EST HAS ALREADY BEEN PAID THERE CANNOT BE ANY DISALLOWANCE U/S 40(A)(IA) OF T HE ACT. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT FOR ALL TH E EARLIER ASSESSMENT YEARS, THE ASSESSEE WAS UNDER THE BONA FIDE IMPRESSION THAT TAX NEED NOT BE DEDUCTED AT THE TIME OF PAYMENT OF INTEREST TO THOS E PAYEE CONCERNS. THE LD.REPRESENTATIVE HAS ALSO PLACED HIS RELIANCE ON T HE JUDGMENT OF THE APEX COURT IN CIT VS HINDUSTAN COCA COLA BEVERAGES P LTD (2007) 293 ITR 226 (DEL). 4 ITA NO.245/COCH/2014 5. ON THE CONTRARY, SHRI K.K. JOHN, THE LD.DR SUBMI TTED THAT ADMITTEDLY, THE ASSESSEE PAID INTEREST TO THE CONCERNS REFERRED IN THE ASSESSMENT ORDER AND TAX WAS NOT DEDUCTED. THE ASSESSEE NOW C LAIMS THAT SINCE THE AMOUNT HAS ALREADY BEEN PAID, PROVISIONS OF SECTION 40(A)(IA) IS NOT APPLICABLE. THE LD.DR PLACED HIS RELIANCE ON THE D ECISION OF THIS TRIBUNAL IN ITA NOS 63 & 64/COCH/2014 & ORS IN SHRI THOMAS G EORGE MUTHOOT & ORS ORDER DATED 28-08-2014, COPY OF WHICH IS FILED AND SUBMITTED THAT THIS TRIBUNAL, BY RELYING UPON THE JUDGMENT OF THE CALCU TTA HIGH COURT IN CRESCENT EXPORTS SYNDICATE & ANOTHER IN ITA 20 OF 2 013 AND GA 190 OF 2013 JUDGMENT DATED 03-04-2013 AND THE JUDGMENT OF THE GUJARAT HIGH COURT IN CIT VS SIKANDARKHAN N TUNWAR ITA NOS 905 O F 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 FOUND THAT THE GUJARAT AND CALCUTTA HIGH COURT DISCUSSED THE MATTER ELABORATELY WHEREAS THE ALLAHABAD HIGH COURT HAS MA DE A PASSING REFERENCE WITHOUT MUCH DISCUSSION. THEREFORE, THIS TRIBUNAL FOUND THAT THE JUDGMENT WHICH DISCUSSED THE POINT IN ISSUE ELABORA TELY AND GAVE ELABORATE REASONS HAS TO BE PREFERRED OVER THE DECI SION WHICH HAS HARDLY GIVEN ANY REASON FOR THE DECISION. ACCORDINGLY, TH IS TRIBUNAL FOLLOWED THE JUDGMENT OF THE CALCUTTA HIGH COURT IN CRESCENT EXP ORTS SYNDICATE & ANOTHER (SUPRA) AND THE GUJARAT HIGH COURT IN SIKAN DARKHAN N TUNWAR (SUPRA) AND CONFIRMED THE DISALLOWANCE MADE BY THE LOWER AUTHORITIES. 5 ITA NO.245/COCH/2014 6. REFERRING TO THE APPROVAL SAID TO BE GRANTED U/S 10(23C) OF THE ACT, THE LD.DR SUBMITTED THAT SECTION 10(23C) IS APPLICA BLE FOR INSTITUTION OR FUND ESTABLISHED FOR CHARITABLE PURPOSE WHICH MAY BE APP ROVED BY THE PRESCRIBED AUTHORITY AFTER CONSIDERING THE OBJECT O F THE FUND OR INSTITUTION, AS THE CASE MAY BE. THE INCOME OF THE ASSESSEE, IF ANY, IS EXEMPT PROVIDED THE SAME IS APPLIED FOR CHARITABLE PURPOSE ON THE BASIS OF ITS OBJECT AND SURPLUS, IF ANY, AS PER THE CONDITIONS I MPOSED BY THE CONCERNED AUTHORITY. THEREFORE, ACCORDING TO THE LD.DR, IT I S NOT A CASE OF TOTAL EXEMPTION OF INCOME RECEIVED BY THE APPROVED FUND. HENCE, THE ASSESSEE HAS TO FILE RETURN OF INCOME DISCLOSING ALL THE PAY MENTS MADE TO THE RESPECTIVE CONCERN AND THE ASSESSEE CANNOT DECIDE A BOUT THE TAXABILITY OF INCOME IN THE HANDS OF THE RECIPIENT CONCERN SINCE THE EXEMPTION IS SUBJECT TO UTILIZATION OF THE FUND FOR CHARITABLE P URPOSE. THEREFORE, ACCORDING TO THE LD.DR, IT CANNOT NOW BE SAID THAT THE INTEREST PAID BY THE ASSESSEE IS NOT TAXABLE IN THE HANDS OF THE RECIPIE NT CONCERNS. THE INTEREST PAID BY THE ASSESSEE IS EXEMPT IN THE HAND S OF THE INSTITUTIONS PROVIDED THEY USED THE SAME FOR CHARITABLE PURPOSE AND IT IS APPROVED BY THE CONCERNED AUTHORITY U/S 10(23C) OF THE ACT. TH E LD.DR FURTHER SUBMITTED THAT THOUGH THE ASSESSEE CLAIMS THAT IN T HE EARLIER ASSESSMENT YEARS TAX WAS NOT DEDUCTED, IT IS NOT KNOWN SINCE W HEN THE ASSESSEE WAS NOT DEDUCTING THE TAX. THE LD.DR SUBMITTED THAT PR INCIPLES OF RES JUDICATA IS 6 ITA NO.245/COCH/2014 NOT APPLICABLE TO THE INCOME-TAX PROCEEDINGS, THERE FORE, MERELY BECAUSE THE TAX WAS NOT DEDUCTED IN EARLIER ASSESSMENT YEAR S IT DOES NOT MEAN THAT THE ASSESSEE COULD CONTINUE THEIR WRONG PRACTICE FO R THE SUBSEQUENT YEARS ALSO WHEN THE LAW REQUIRES THE ASSESSEE TO DEDUCT T AX. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTED LY, THE INTEREST WAS PAID BY THE ASSESSEE TO THE ABOVE CONCERNS. IT IS ALSO AN ADMITTED FACT THAT TAX WAS NOT DEDUCTED AS REQUIRED AT THE TIME OF MAKING THE PAYMENT. 8. THE FIRST CONTENTION OF THE ASSESSEE IS THAT SIN CE THE INTEREST WAS ALREADY PAID, PROVISIONS OF SECTION 40(A)(IA) IS NO T APPLICABLE. THE CONTENTION OF THE ASSESSEE IS THAT PROVISIONS OF SE CTION 40(A)(IA) IS APPLICABLE ONLY IN RESPECT OF THE AMOUNTS REMAINS T O BE PAID AS ON THE LAST DAY OF THE FINANCIAL YEAR. THIS TRIBUNAL IS UNABLE TO UPHOLD THE CONTENTION OF THE ASSESSEE. THIS TRIBUNAL HAD AN OCCASION TO EXAMINE AN IDENTICAL SET OF FACTS IN SHRI THOMAS GEORGE MUTHOOT & ORS (S UPRA). THIS TRIBUNAL, AFTER A DETAILED DISCUSSION, DECIDED THE ISSUE IN T HE FOLLOWING MANNER: 6. NOW COMING TO THE CONTENTION OF THE ASSESSEE TH AT THE RECIPIENT FIRM HAS ALREADY PAID THE TAX, THIS TRIBU NAL FINDS NO MERIT IN SUCH CONTENTION. THE APEX COURT, IN HINDU STAN COCO 7 ITA NO.245/COCH/2014 COLA BEVERAGES (P) LTD (SUPRA), AFTER REFERRING TO THE CIRCULAR ISSUED BY THE CBDT IN CIRCULAR NO.275/201/95-IT(B) DATED 29- 01-1997 FOUND THAT WHEN THE DEDUCTEE-ASSESSEE PAID THE TAX, NO DEMAND VISUALIZED U/S 201(1) OF THE ACT SHALL BE ENFORCED AGAINST THE DEFAULTER-ASSESSEE. IN THE CASE BEFORE US, THE DISALLOWANCE WAS MADE U/S 40(A)(IA) OF THE ACT. TH E OBJECT OF SECTION 40(A)(IA) IS TO COMPEL THE ASSESSEE TO DEDU CT TAX AT SOURCE. IN OTHER WORDS, AS A PRECONDITION FOR CLAI MING THE EXPENDITURE OTHERWISE ALLOWABLE, THE ASSESSEE HAS T O DEDUCT TAX AS REQUIRED UNDER THE RELEVANT PROVISIONS OF TH E ACT. ON THE CONTRARY, THE OBJECT OF SECTION 201 IS ONLY TO COMPENSATE THE GOVERNMENT FOR FAILURE OF THE ASSESSEE TO DEDUC T TAX AT SOURCE. SECTION 201 ENABLES THE GOVERNMENT TO RECO VER THE TAX FROM THE ASSESSEE WHO DEFAULTS IN MAKING THE DE DUCTION AT THE TIME OF PAYMENT. THEREFORE, THE PROVISIONS OF SECTION 40(A)(IA) AND 201 OPERATE IN TWO DIFFERENT FIELDS. SECTION 40(A)(IA) WILL NOT OVERRIDE THE PROVISIONS OF SECTI ON 201 OF THE INCOME-TAX ACT. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE JUDGMENT OF THE APEX COURT IN HIND USTAN COCO COLA BEVERAGES (P) LTD (SUPRA) RENDERED IN THE CONTEXT OF SECTION 201 MAY NOT BE APPLICABLE IN THE CONTEXT OF APPLICATION OF SECTION 40(A)(IA) OF THE ACT. 7. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE PARLIAMENT BY FI NANCE ACT, 2012 INCORPORATED SECOND PROVISO TO SECTION 40(A)(I A) OF THE ACT WITH EFFECT FROM 01-04-2013. FOR THE PURPOSE O F CONVENIENCE, WE ARE REPRODUCING SECOND PROVISO AS I T IS INSERTED BY FINANCE ACT, 2012 BELOW: 8 ITA NO.245/COCH/2014 PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO S UB-SECTION (1) OF SECTION 201, THEN, FOR THE PURPOSE OF THIS S UB-CLAUSE, IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVI SO. 8. IN VIEW OF THIS SECOND PROVISO WHICH CAME TO BE INSERTED IN THE STATUTE BOOK WITH EFFECT FROM 01-04 -2013, WHEREVER THE ASSESSEE FAILS TO DEDUCT TAX ON ANY SU M, BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT U/S 201(1) THEN, IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID TAX ON THE SAID SUM ON THE DATE OF FURNISHING OF THE RE TURN OF INCOME. 9. THE NEXT QUESTION ARISES FOR CONSIDERATION IS WH ETHER THE SECOND PROVISO TO SECTION 40(A)(IA) AS INCORPOR ATED BY FINANCE ACT, 2012 IS RETROSPECTIVE IN OPERATION OR PROSPECTIVE IN OPERATION. WE ARE CONSCIOUS THAT SOME OF THE BE NCHES OF THIS TRIBUNAL IN THE COUNTRY HAS TAKEN THE VIEW THA T THE SECOND PROVISO TO SECTION 40(A)(IA) IS RETROSPECTIVE IN OP ERATION, THEREFORE, APPLICABLE TO EARLIER PERIOD ALSO. HOWE VER, THE JURISDICTIONAL HIGH COURT IN THE CASE OF PRUDENTIAL LOGISTICS & TRANSPORTS IN ITA NO. 01 OF 2014 JUDGMENT DATED 13 TH JANUARY, 2014, COPY OF WHICH HAS BEEN FILED BY THE LD.DR, FOUND THAT THE SECOND PROVISO IS NOT APPLICABLE FOR EARLIER 9 ITA NO.245/COCH/2014 ASSESSMENT YEARS. IN FACT, THE KERALA HIGH COURT H AS OBSERVED AS FOLLOWS: 5. READING OF SECTION 40A(IA) ALONG WITH 2 ND PROVISO AND SECTION 201(1) ALONG WITH PROVISO, IT WOULD MEAN TH AT THE MANDATE OR REQUIREMENT ON THE PART OF THE PAYER TO DEDUCT TAX AT SOURCE IS NOT SO STRICT IF THEY ARE ABLE TO SHOW THAT THE PAYEE OR THE RECIPIENT OF THE AMOUNTS HAS PAID TAX IN ACC ORDANCE WITH THE PROVISIONS OF SECTION 201(1) AND THE PROVI SO. 6. THIS WAS NOT THE CLAIM MADE BY THE ASSESSEE BEFO RE THE ASSESSING OFFICER. THE CLAIM WAS ON A DIFFEREN T STAND, INITIALLY REFLECTING THE AMOUNTS AS LOAN IN THE ACC OUNT BOOKS THOUGH SHOWN AS FREIGHT CHARGES IN THE RETURNS AND LATER EXPLAINED THAT IT WAS NOT THE LOAN AMOUNT BUT FREIG HT CHARGES. IT WAS NEVER THE CASE OF THE ASSESSEE THAT THERE WA S NO MANDATE SUBSEQUENT TO AMENDMENT, TO DEDUCT TAX AS T DS IN THE LIGHT OF ABOVE PROVISIONS. THE ASSESSMENT YEAR IN QUESTION IS 2007-08 AND THE AMENDMENT GIVING BREATH ING SPACE TO PAYER OF AMOUNTS IS WITH EFFECT FROM 01/04 /2013. THEREFORE, THE SAID BENEFIT IS NOT APPLICABLE TO TH E ASSESSEE. EVEN OTHERWISE, ON FACTUAL SITUATION, THE VERY FACT THAT THESE AMOUNTS WERE CLAIMED AS LOAN INITIALLY, TILL THE SC RUTINY CAME UP FOR CONSIDERATION BEFORE ASSESSING AUTHORITY WOU LD ONLY INDICATE THE REAL INTENTION OF THE ASSESSEE FIRM I. E NOT TO DISCLOSE THIS AMOUNT AS FREIGHT CHARGES BUT SOMETHI NG ELSE AS REPAYMENT OF LOAN. 10 ITA NO.245/COCH/2014 10. IN VIEW OF THE ABOVE JUDGMENT OF THE JURISDICTI ONAL HIGH COURT, IT IS BINDING ON THIS TRIBUNAL THAT SECOND P ROVISO WHICH WAS INTRODUCED BY FINANCE ACT, 2012 IS NOT APPLICAB LE FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. HENCE, THE C IT(A) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE ASSE SSING OFFICER. 11. THE NEXT CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE HAS ALREADY PAID THE AMOUNT, PROVISIONS OF SECTION 40(A)(IA) IS APPLICABLE ONLY IN RESPECT OF THE AMOU NT WHICH REMAINS TO BE PAYABLE ON THE LAST DAY OF THE FINANC IAL YEAR. THE LD.REPRESENTATIVE PLACED HIS RELIANCE ON THE DE CISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN MERILYN SHIPP ING & TRANSPORTS VS ADDLCIT (2012) 70 DTR 81 AND ALSO THE JUDGMENT OF 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 AND SUBMITTED THAT THE SLP FILED B Y THE REVENUE IN THE APEX COURT AGAINST THE JUDGMENT OF T HE ALLAHABAD HIGH COURT IN M/S VECTOR SHIPPING SERVICE S (P) LTD (SUPRA) IS DISMISSED BY THE APEX COURT. IT IS WELL SETTLED PRINCIPLES OF LAW THAT THE LAW LAID DOWN BY THE APE X COURT IS BINDING ON ALL COURTS AND AUTHORITIES INCLUDING THI S TRIBUNAL UNDER ARTICLE 141 OF THE CONSTITUTION OF INDIA. IT IS ALSO EQUALLY SETTLED PRINCIPLE THAT A DISMISSAL OF SLP WITHOUT A NY DISCUSSION IS NOT THE LAW DECLARED BY THE APEX COURT. THE APE X COURT THOUGHT IT FIT THAT IT WAS NOT A FIT CASE TO BE ADM ITTED FOR CONSIDERATION. THEREFORE, WHILE DISMISSING THE SLP , THE APEX COURT DID NOT DECLARE ANY LAW. HENCE, WE CANNOT SA Y THAT THE APEX COURT HAS DECLARED THE LAW DECLARING THAT SECT ION 11 ITA NO.245/COCH/2014 40(A)(IA) IS APPLICABLE ONLY IN RESPECT OF THE AMOU NTS REMAINS TO BE PAYABLE AT THE LAST DAY OF THE FINANCIAL YEAR . 12. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMEN T OF THE ALLAHABAD HIGH COURT IN CIT VS M/S VECTOR SHIPP ING SERVICES (P) LTD (SUPRA), COPY OF WHICH IS FILED BY THE ASSESSEE. THE ALLAHABAD HIGH COURT, AFTER REPRODUC ING THE RELEVANT PARAGRAPH FROM THE ORDER OF CIT(A) AND REF ERRING TO THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN MERILYIN SHIPPING & TRANSPORTS (SUPRA) FOUND THAT THE TRIBUN AL HAS NOT COMMITTED AN ERROR. IT IS OBVIOUS THAT THERE IS NO DISCUSSION ABOUT THE CORRECTNESS OR OTHERWISE OF THE DECISION RENDERED BY THE SPECIAL BENCH OF THIS TRIBUNAL IN MERILYN SHIPP ING & TRANSPORTS (SUPRA). HOWEVER, WE FIND THAT THE GUJA RAT HIGH COURT IN THE CASE OF CIT VS SIKANDARKHAN N TUNVAR I TA 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 CONSIDERED THE DECISION OF THE SPECIAL BENCH OF THI S TRIBUNAL IN MERILYN SHIPPING & TRANSPORTS (SUPRA) AND SPECIF ICALLY DISAGREED WITH THE PRINCIPLES LAID DOWN BY THE SPEC IAL OF THIS TRIBUNAL IN MERILYN SHIPPING & TRANSPORTS (SUPRA). THE CALCUTTA HIGH COURT ALSO IN THE CASE OF CRESCENT EX PORTS SYNDICATE & ANOTHER IN ITAT 20 OF 2013 AND GA 190 O F 2013 JUDGMENT DATED 03-04-2013 CONSIDERED ELABORATELY TH E JUDGMENT OF THE SPECIAL BENCH OF THIS TRIBUNAL IN M ERILYN SHIPPING & TRANSPORTS (SUPRA) AND FOUND THAT THE DE CISION RENDERED BY THE SPECIAL BENCH OF THIS TRIBUNAL IS N OT THE CORRECT LAW. IT IS WELL SETTLED PRINCIPLES OF LAW THAT WHEN 12 ITA NO.245/COCH/2014 DIFFERENT HIGH COURTS EXPRESSED DIFFERENT OPINIONS ON A POINT OF LAW, THEN, NORMALLY, THE BENEFIT OF DOUBT UNDER THE TAXATION LAW WOULD GO TO THE ASSESSEE. IT IS ALSO EQUALLY S ETTLED PRINCIPLES OF LAW THAT THE JUDGMENT WHICH DISCUSSES THE POINT IN ISSUE ELABORATELY AND GIVES AN ELABORATE REASONI NG HAS TO BE PREFERRED WHEN COMPARED TO THE JUDGMENT WHICH HA S NO REASONING AND DISCUSSION. ADMITTEDLY, THE CALCUTTA HIGH COURT AND GUJARAT HIGH COURT HAVE DISCUSSED THE ISS UE ELABORATELY AND THE SPECIFIC REASONING HAS ALSO BEE N RECORDED AS TO WHY THE SPECIAL BENCH IS NOT CORRECT. THEREF ORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE JUDG MENTS OF THE CALCUTTA HIGH COURT CRESCENT EXPORTS SYNDICATE & AN OTHER (SUPRA) AND GUJARAT HIGH COURT IN SIKANDARKHAN N TU NVAR (SUPRA) HAVE TO BE PREFERRED WHEN COMPARED TO THE A LLAHABAD HIGH COURT IN M/S VECTOR SHIPPING SERVICES (P) LTD (SUPRA). 13. FOR THE PURPOSE OF CONVENIENCE WE REPRODUCING B ELOW THE OBSERVATIONS MADE BY THE CALCUTTA HIGH COURT IN CRESCENT EXPORTS SYNDICATE & ANOTHER (SUPRA) AND GUJARAT HIG H COURT IN SIKANDARKHAN N TUNVAR (SUPRA): CALCUTTA HIGH COURT IN CRESCENT EXPORTS SYNDICATE & ANOTHER (SUPRA) BEFORE DEALING WITH THE SUBMISSIONS OF THE 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. 13 ITA NO.245/COCH/2014 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 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. 14 ITA NO.245/COCH/2014 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 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:- 15 ITA NO.245/COCH/2014 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 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 16 ITA NO.245/COCH/2014 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. 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 17 ITA NO.245/COCH/2014 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 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 ME RILYN SHIPPING & TRANSPORTS ARE NOT ACCEPTABLE. THE SUBM ISSIONS ADVANCED BY LEARNED ADVOCATES HAVE ALREADY BEEN DEA LT WITH AND REJECTED. 18 ITA NO.245/COCH/2014 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 TECHNICAL SER VICES PAYABLE TO RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR OR S UB- 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, 19 ITA NO.245/COCH/2014 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 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 20 ITA NO.245/COCH/2014 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. 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. 21 ITA NO.245/COCH/2014 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 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. 22 ITA NO.245/COCH/2014 14. BY FOLLOWING THE JUDGMENTS OF THE CALCUTTA HIGH COURT IN CRESCENT EXPORT SYNDICATE (SUPRA) AND THE GUJARAT H IGH COURT IN SIKANDARKHAN N TUNVAR (SUPRA), THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPING & TRANSPORTS (SUPRA) AND THE JUDGMENT OF THE ALLAHABAD HIGH COUR T IN VECTOR SHIPPING SERVICES (P) LTD (SUPRA) ARE NOT AP PLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION WHEREAS T HE JUDGMENTS OF THE CALCUTTA HIGH COURT IN CRESCENT E XPORT SYNDICATE (SUPRA) AND THE GUJARAT HIGH COURT IN SIK ANDARKHAN N TUNVAR (SUPRA) ARE SQUARELY APPLICABLE TO THE FAC TS OF THE CASE. RESPECTFULLY FOLLOWING THE JUDGMENTS OF THE CALCUTTA HIGH COURT IN CRESCENT EXPORT SYNDICATE (SUPRA) AND THE GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR (SUPRA) , WE DO NOT SEE ANY INFIRMITY IN THE ORDERS OF THE LOWER AU THORITIES. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E CONFIRMED. 9. IN VIEW OF THE ABOVE DECISION OF THIS TRIBUNAL O N IDENTICAL SET OF FACTS, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LOWER AUTHORITY. 10. THE NEXT CONTENTION OF THE ASSESSEE IS THAT THE PAYMENT WAS PAID TO THE FUND WHICH WAS APPROVED U/S 10(23C)(IV) OF THE ACT. THE ASSESSEE HAS FILED A COPY OF AN ORDER PASSED BY THE CHIEF CO MMISSIONER DATED 18- 08-2010 APPROVING KERALA BUILDING & OTHER CONSTRUCT IONS WORKERS WELFARE BOARD U/S 10(23C) OF THE ACT. ONE OF THE CONDITION S FOR EXEMPTION IS THAT THE INSTITUTION SHALL NOT INVEST OR DEPOSIT ITS FUN D OTHER THAN THE MODE 23 ITA NO.245/COCH/2014 PRESCRIBED U/S 11(5) OF THE ACT. IT IS NOT KNOWN W HETHER THE OTHER FUNDS / CONCERNS HAD SUCH APPROVAL FROM THE CHIEF COMMISSIO NER. AS RIGHTLY OBSERVED BY THE CIT(A), ONLY IN RESPECT OF BOARDS / FUNDS WHICH WERE STATUTORILY NOT REQUIRED TO FILE RETURN OF INCOME U /S 139, MAY ENJOY A TOTAL EXEMPTION. IN RESPECT OF INSTITUTIONS / FUNDS TO WH ICH THE ASSESSEE PAID THE INTEREST WITHOUT DEDUCTING TAX, NO SUCH EXEMPTION F ROM FILING RETURN OF INCOME WAS GRANTED BY THE CBDT. SECTION 139(4C) RE QUIRES THE ASSESSEE TO FILE THE RETURN OF INCOME WHEREVER THE INCOME EX CEEDS THE TAXABLE LIMIT WITHOUT GIVING EFFECT TO THE PROVISIONS OF SECTION 10. THEREFORE, THE RECIPIENT ENTITIES ARE REQUIRED TO FILE THE RETURNS OF INCOME EVEN THOUGH THEY ARE APPROVED U/S 10(23C) OF THE ACT BY THE CONCERNE D CHIEF COMMISSIONER WHEREVER THE INCOME EXCEEDS THE TAXABLE LIMIT WITHO UT GIVING EFFECT TO PROVISIONS OF SECTION 10(23C) OF THE ACT. THEREFOR E, FOR COMPUTATION OF TOTAL INCOME, THE RECIPIENT ENTITY MAY EXCLUDE THE INCOME WHICH IS APPLIED FOR CHARITABLE PURPOSE AS PER THE OBJECT OF THE FUN D / INSTITUTION AND THE CONDITIONS IMPOSED BY THE CHIEF COMMISSIONER. HENC E, IT IS A MATTER FACTUALLY TO BE VERIFIED IN EACH AND EVERY CASE AND THERE CANNOT BE A TOTAL EXEMPTION. IN THE CASE BEFORE US, ONLY IN RESPECT OF ONE RECIPIENT, VIZ. KERALA BUILDING & OTHER CONSTRUCTIONS WORKERS WELFA RE BOARD THE ASSESSEE HAS FILED COPY OF THE APPROVAL RECEIVED FR OM THE CHIEF COMMISSIONER. IN RESPECT OF OTHER RECIPIENT FUNDS / BOARD THE COPIES OF THE APPROVAL ARE NOT FILED. THEREFORE, IT NEEDS TO BE VERIFIED. ACCORDINGLY, THE 24 ITA NO.245/COCH/2014 ORDERS OF LOWER AUTHORITIES ARE SET ASIDE ONLY FOR THE LIMITED PURPOSE OF EXAMINING WHETHER THE RECIPIENT CONCERNS / BOARDS A RE APPROVED U/S 10(23C)(IV) OF THE ACT BY THE CHIEF COMMISSIONER / DIT. THEREAFTER, THE ASSESSING OFFICER SHALL FIND OUT WHETHER THE INTERE ST IS TAXABLE IN THE HANDS OF THE RECIPIENT FUNDS / BOARD OR NOT AND THEN DECI DE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTU NITY OF HEARING TO THE ASSESSEE. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST NOVEMBER, 2014. SD/- SD/- (CHANDRA POOJARI) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 21 ST NOVEMBER, 2014 PK/- COPY TO: 1. THE KASARGOD DISTRICT CO-OPERATIVE BQANK LTD, KA SARAGOD 671 121 2. THE DY.CIT, KANNUR 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