M/s Rana Polycot Ltd., Chandigarh V. Addl. CIT, Chandigarh

ITA 260/CHANDI/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7080 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-05-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 15-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Depreciation; Search and seizure; Retrospective amendment; Question of law; Non passing of speaking order; Right to appeal; Notional interest
• Section: 143(3); 115JB; 194C; 56; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.260 /CHD/2011 ASSESSMENT YEAR : 2007-08 M/S RANA POLYCOT LTD., VS. THE ADDL.CIT, SCO 49-50, SECTOR 8-C, RANGE 1, CHANDIGARH. CHANDIGARH. BADDI. PAN: AAACR7623M AND ITA NO.471 /CHD/2011 ASSESSMENT YEAR : 2007-08 THE ADDL.CIT, VS. M/S RANA POLYCOT LTD., RANGE 1, SCO 49-50, SECTOR 8-C, CHANDIGARH. CHANDIGARH. PAN: AAACR7623M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI T.N.SINGLA DEPARTMENT BY : SMT.JYOTI KUMARI, DR DATE OF HEARING : 24.07.2014 DATE OF PRONOUNCEMENT : 28.08.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REV ENUE ARE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEAL S), CHANDIGARH DATED 23.11.2010 RELATING TO ASSESSMENT YEAR 2007-0 8 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2 2. THE CROSS APPEALS FILED BY THE ASSESSEE AND REVE NUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLI DATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE REVENUE IN ITA NO.471/CHD/2011 HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL : 1. AS PER FACTS AND CIRCUMSTANCE OF THE CASE AND PR OVISIONS OF LAW, THE CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.36,12, 182/- MADE U/S 36(1 )(VA) OF THE INCOME TAX ACT, 1961, BY THE A.O. ON ACCOUNT OF LATE PAYMENT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND 2. AS PER FACTS AND CIRCUMSTANCE OF THE CASE AND P ROVISION OF LAW, THE CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.1, 61,087/- MADE U/S 36(1 )(VA) BY THE A.O ON ACCOUNT OF LATE P AYMENT OF EMPLOYEES CONTRIBUTION TO ESI. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. CIT(A) HAS ERRED IN ALLOWING DEPRECIATION @ 15% ON ELECTRICAL INSTALLA TIONS WHEREAS THE DEPRECIATION @ 15% IS ALLOWABLE ONLY FOR PLANT & MA CHINERY AND NOT FOR ELECTRICAL INSTALLATIONS AS IT IS A SEPARATE HEAD D ISTINCT FORM PLANT & MACHINERY. 4. THE APPELLANT CRAVES TO ADD OR AMEND ANY GROUND /GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR DISPOSED OFF. 5. IT IS PRAYED THAT THE ORDER OF THE LD. CIT( A) BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 4. THE GROUND NOS.1 AND 2 RAISED BY THE REVENUE ARE AGAINST THE ORDER OF THE CIT (APPEALS) IN ALLOWING THE AMOUNT P AID TOWARDS PF AND ESI. THE ASSESSING OFFICER DISALLOWED THE SAID CL AIM OF THE ASSESSEE AS THE SAME WAS NOT PAID WITHIN DUE DATE PRESCRIBED UNDER THE ACT. HOWEVER, THE CIT (APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. M/S NUCHEM LTD. IN ITA NO.323 OF 2009, FOLLOWIN G THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT VS. ALOM EXTR USIONS LTD. [319 ITR 306 (SC)]. THE RELEVANT EXTRACT OF THE DECISI ON OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IS REPRODUCED BY THE CI T (APPEALS) AT PAGES 13 AND 14 OF THE APPELLATE ORDER, WHICH IS NO T BEING REPRODUCED FOR 3 THE SAKE OF BREVITY. THE ISSUE ARISING IN THE PRE SENT APPEAL IS IDENTICAL TO THE ISSUE BEFORE THE HON'BLE HIGH COURT WHERE TH E ASSESSEE HAD PAID THE AMOUNT EITHER WITHIN THE GRACE PERIOD OR BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME. FOLLOWING THE SAME PARIT Y OF REASONING WE UPHOLD THE ORDER OF THE CIT (APPEALS) AND DISMISS T HE GROUND OF APPEAL NOS.1 AND 2 RAISED BY THE REVENUE. 5. THE ISSUE IN GROUND NO.3 RAISED BY THE REVENUE I S AGAINST THE ALLOWABILITY OF DEPRECIATION @ 15% ON ELECTRIC INST ALLATION. SIMILAR CLAIM WAS ALLOWED TO THE ASSESSEE IN ASSESSEES OWN CASE IN ITA NO.26/CHANDI/2007 IN ASSESSEES OWN CASE. THE A SSESSING OFFICER HAD DISALLOWED DEPRECIATION @ 15% ON ELECTRIC INSTALLAT ION. HOWEVER, THE CIT (APPEALS) FOLLOWING THE ORDER OF THE TRIBUNAL H AD ALLOWED THE SAID CLAIM. 6. WE ARE IN CONFORMITY WITH THE ORDER OF THE CIT ( APPEALS) IN ALLOWING DEPRECIATION @ 15% ON ELECTRIC INSTALLATIO N IN VIEW OF THE SIMILAR CLAIM BEING ALLOWED IN THE EARLIER YEARS. CONSEQUENTLY THE GROUND OF APPEAL NO.3 RAISED BY THE REVENUE IS DISM ISSED. 7. THE ASSESSEE IN ITA NO.260/CHD/2011 HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL : 1. THAT THE ORDERS OF LEARNED CIT(A) IS BAD, AGAINST T HE FACTS & LAW. 2. THAT THE LEARNED CIT(A) WRONGLY DISALLOWED PART OF INTEREST U/S 36(L)(III) AMOUNTING TO RS.2,19,52,980 FOR CAPITALIZATION OF I NTEREST RELATING TO CAPITAL WORK IN PROGRESS. 3. THAT THE LEARNED CIT(A) HAS NOT RESTRICTED THE DIS ALLOWANCE OF INTEREST U/S 36(L)(III) ON PROPORTIONATE TO TOTAL A SSET METHOD FOR CAPITALIZATION OF INTEREST RELATING TO CAPITAL WORKING IN PROGRESS. 4. THAT THE LEARNED CIT(A) HAS WRONGLY DISALLOWED @12% INTEREST U/S 36(L)(III) AMOUNTING TO RS.60,03,823/- ON ACCOUNT O F NOTIONAL INTEREST ON FUNDS TRANSFERRED TO M/S RANA SUGAR LTD. 5. THAT THE LEARNED CIT(A) HAS WRONGLY DISALLOWED PAYM ENTS MADE BY THE COMPANY 4 DURING THE YEAR AMOUNTING TO RS.27,33,461/- U/S 40A (IA) OWING TO NON-DEDUCTION OF TDS ON PAYMENTS MADE TO THE CLEARING & FORWARDING A GENTS OF NON-RESIDENT SHIPPING COMPANIES AS OCEAN FREIGHT & OTHER REIMBUR SEMENTS. 6. THAT THE LEARNED CIT(A) HAS WRONGLY TREATED DEFERRE D TAX AMOUNTING TO RS.1,71,68,000/- AS BOOK PROFIT FOR PURPOSE OF CALC ULATION OF MAT U/S 115 JB 7. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEN D OR WITHDRAW ANY GROUNDS OF APPEAL BEFORE THE FINAL HEARING. 8. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS GENERAL IN NATURE AND HENCE THE SAME IS DISMISSED. 9. THE GROUND OF APPEAL NOS.2 AND 3 RAISED BY THE A SSESSEE ARE AGAINST THE DISALLOWANCE OF INTEREST ON CAPITAL WOR K-IN-PROGRESS. 10. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY ADMITT ED THAT THE SAID INTEREST HAD TO BE DISALLOWED UNDER SECTION 36(1)(I II) OF THE ACT. HOWEVER, IT WAS POINTED OUT THAT THE SAID DISALLOWA NCE SHOULD BE RE- WORKED ON PRO-RATA BASIS. 11. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE ORDERS OF THE AUTHORITIES BELOW. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER HAD NOTED THAT THE ASSESSEE HAD RAISED BOTH HE SECURED AND UN-SECU RED LOANS DURING THE YEAR AND THERE WAS CLAIM OF INTEREST EXPENDITURE AT RS.9.25 CRORES. ON THE OTHER HAND, THE ASSESSEE HAD MADE INVESTMENT IN THE CAPITAL WORK-IN- PROGRESS AND IN VIEW OF THE PROVISO TO SECTION 36(1 )(III) OF THE ACT, THE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE TO EXPLA IN THE UTILIZATION OF THE BORROWED FUNDS. THE ASSESSEE IN REPLY POINTED OUT THAT THE TERM LOAN RAISED ON DIFFERENT DATES AND ITS UTILIZATION FOR INVESTMENT IN WORK- IN-PROGRESS. AS ON 31.3.2007 THE CAPITAL WORK-IN- PROGRESS AMOUNTED TO RS.23,27,28,072/- AS AGAINST OPENING CAPITAL WORK-I N-PROGRESS OF RS.5,82,64,851/- SHOWN. THE ASSESSING OFFICER WOR KED OUT THE 5 DISALLOWANCE UNDER THE PROVISO TO SECTION 36(1)(III ) OF THE ACT TOTALING RS.2.19 CRORES, WHICH WAS UPHELD BY THE CIT (APPEAL S). 13. THE ONLY PLEA OF THE ASSESSEE BEFORE US WAS THA T THE SAID DISALLOWANCE SHOULD BE WORKED OUT ON PRO-RATA BASIS . THE ASSESSEE IN ADDITION TO THE SECURED AND UN-SECURED LOANS ON WHI CH IT WAS PAYING INTEREST HAD CERTAIN INTEREST FREE CAPITAL AND LOAN S ON WHICH NO INTEREST WAS BEING PAID. ON THE OTHER HAND, THE ASSESSEE H AD MADE INVESTMENT IN THE CAPITAL WORK-IN-PROGRESS AGAINST WHICH THE PROV ISO TO SECTION 36(1)(III) OF THE ACT WERE CLEARLY ATTRACTED UNDER WHICH DISALLOWANCE OF INTEREST ON ACCOUNT OF THE SAID INVESTMENT IN CAPIT AL WORK-IN-PROGRESS HAD TO BE MADE. HOWEVER, WE FIND MERIT IN THE PLE A OF THE ASSESSEE IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE WHE RE THE ASSESSEE HAD BOTH INTEREST BEARING FUNDS AVAILABLE TO IT AND NON INTEREST BEARING FUNDS ALSO AVAILABLE TO IT. IN VIEW THEREOF, THE DISALL OWANCE OF INTEREST SHOULD BE WORKED OUT ON PRO-RATA BASIS AND NOT BY APPLYING SIMPLE RATE OF INTEREST OF 12% TO THE CLOSING BALANCE. THE ASSE SSING OFFICER HAD TABULATED THE INVESTMENTS IN CAPITAL WORK-IN-PROGRE SS, WHICH ARE ON DIFFERENT DATES. IN VIEW HEREOF, WHERE THE INVEST MENT HAD BEEN MADE FROM DATE TO DATE, THEN THE DISALLOWANCE OF INTERES T UNDER THE PROVISO TO SECTION 36(1)(III) OF THE ACT HAD TO BE WORKED OUT ON PRO-RATA BASIS AS LINKED TO THE DATE OF INVESTMENT IN THE CAPITAL WOR K-IN-PROGRESS. THE ASSESSING OFFICER, ON THE OTHER HAND, HAD APPLIED T HE RATE OF 12% ON THE CAPITAL WORK-IN-PROGRESS AND WORKED OUT THE DISALLO WANCE UNDER THE PROVISIONS OF PROVISO TO SECTION 36(1)(III) OF THE ACT. WE DIRECT THE ASSESSING OFFICER TO RE-WORK THE INTEREST DISALLOWA BLE UNDER THE PROVISIONS OF PROVISO TO SECTION 36(1)(III) OF THE ACT, AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE GROUND OF APPEAL NOS.2 AND 3 RAISED BY THE ASSESSEE ARE THUS PARTLY ALLOWED. 6 14. THE ISSUE IN GROUND NO.4 IS AGAINST THE DISALLO WANCE UNDER SECTION 36(1)(III) OF THE ACT ON ACCOUNT OF FUNDS TRANSFERR ED TO M/S RANA SUGAR LTD. 15. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY ADMITT ED THAT THE SAID ISSUE IS LINKED TO THE ISSUE RAISED IN GROUND NOS 2 AND 3 AND THE DISALLOWANCE SHOULD BE WORKED ON PRO-RATA BASIS. 16. THE LEARNED D.R. FOR THE REVENUE, ON THE OTHER HAND, PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 17. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD MA DE CERTAIN ADVANCES TO ITS SISTER CONCERN M/S RANA SUGAR LTD. ON WHICH NO INTEREST WAS CHARGED. HOWEVER, ON THE OTHER HAND, THE ASSESSEE HAD RAISED BOTH SECURED AND UNSECURED LOANS ON INTEREST. THE PLEA OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW AND BEFORE US WAS THAT IT HAD ALSO CERTAIN INTEREST FREE FUNDS, WHICH IN TURN WERE UTILIZED FO R MAKING THE SAID ADVANCES. THE LEARNED A.R. FOR THE ASSESSEE HAD F AIRLY ACCEPTED THAT THE PROVISIONS OF SECTION 36(1)(III) OF THE ACT ARE CLE ARLY ATTRACTED IN THIS CASE. HOWEVER, THE DISALLOWANCE OF INTEREST @ 12 % IS NOT CORRECT AND THE SAME SHOULD BE WORKED OUT ON PRO-RATA BASIS. WE FIND MERIT IN THE PLEA OF THE ASSESSEE IN THIS REGARD AND DIRECT THE ASSESSING OFFICER TO RE- WORK THE SAID DISALLOWANCE. THE GROUND OF APPEAL NO.4 RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 18. THE ISSUE IN GROUND NO.5 RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE AC T FOR NON DEDUCTION OF TAX AT SOURCE OF PAYMENTS MADE TO THE CLEARING A ND FORWARDING AGENTS OF NON-RESIDENT SHIPPING COMPANIES AS OCEAN FREIGH T AND OTHER REIMBURSEMENTS. 7 19. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAD MADE PAYMENTS TO VARIOUS CLEARING AND FORWARDING AGENTS OUT OF WH ICH NO TAX WAS DEDUCTED AT SOURCE. THE SAID PAYMENTS INCLUDED OC EAN FREIGHT AND RAILWAY FREIGHT. THE PLEA OF THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT THE PROVISIONS TDS UNDER SECTION 194C OF T HE ACT WERE NOT APPLICABLE TO THE RAILWAY FREIGHT AS PER EXPLANATIO N-III TO SECTION 194C OF THE ACT. THE ASSESSING OFFICER TABULATED THE D ETAILS OF FREIGHT ON WHICH NO TAX WAS DEDUCTED AT SOURCE UNDER PARA 4 AT PAGE 26 OF THE ASSESSMENT ORDER, WHICH INCLUDED THE PAYMENTS TOWAR DS OCEAN FREIGHT. THE ASSESSING OFFICER NOTED THAT SIMILAR ISSUE AROS E IN THE CASE OF THE ASSESSEE DURING HE ASSESSMENT PROCEEDINGS COMPLETED UNDER SECTION 143(3) OF THE ACT RELATING TO ASSESSMENT YEAR 2006- 07 WHEREIN IT WAS HELD THAT CBDT CIRCULAR NO.723 DATED 19.9.1995 WAS NOT APPLICABLE TO THE PAYMENTS MADE ON ACCOUNT OF OCEAN FREIGHT. FUR THER IT WAS HELD THAT THE ISSUE WAS COVERED BY THE DECISION OF THE HON'BL E SUPREME COURT IN ASSOCIATED CEMENT CO. LTD. VS. CIT & ANOTHER [201 I TR 435 (SC)]. FOLLOWING THE SAME, THE ASSESSING OFFICER DISALLOWE D SUM OF RS.27,33,461/-. 20. THE PLEA OF THE ASSESSEE BEFORE THE CIT (APPEAL S) WAS THAT THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT COU LD BE MADE ONLY ON THE AMOUNT PAYABLE AT THE END OF THE YEAR AND NOT O N THE AMOUNT PAID DURING THE YEAR. FURTHER THE PLEA RAISED BY THE A SSESSEE WAS THAT THE REIMBURSEMENTS OF EXPENDITURE TO THE AGENTS OF FORE IGN SHIPPING COMPANIES WERE EXEMPT FROM THE PROVISIONS OF TDS AS PER CBDT CIRCULAR NO.723 DATED 19.9.1995. THE CIT (APPEAL S) NOTED THE PROVISIONS OF CIRCULAR NO.723 DATED 19.9.1995, WHIC H STIPULATED THAT THE AREA OF OPERATION OF THE TDS WAS CONFINED TO THE PA YMENTS MADE TO THE RESIDENTS, WHEREAS SECTION 172 OPERATES IN THE AREA OF COMPUTATION OF 8 PROFITS FROM SHIPPING BUSINESS OF NON-RESIDENTS. THE CIT (APPEALS) VIDE PARAS 28 TO 30 OBSERVED AS UNDER: 28. THOUGH THE APPELLANT HAS SOUGHT SUPPORT FROM T HIS CIRCULAR TO COVER NON -DEDUCTION OF TAX IN THIS CASE BUT IT IS OBVIOUSLY CLEAR THAT WHEN THE CIRCULAR TALKS OF AGENT OF THE NON- RESIDENT COMPANY, RELATIONSHIP HAS TO BE ESTABLISHE D AS SUCH. 29. IN THIS CASE, THERE IS NOTHING ON RECORD TO PRO VE THIS NOR HAS ANYTHING BEEN SUBMITTED AT ASSESSMENT OR APPELLATE STAGE TO ESTABLISH THIS RELATIONSHIP. RATHER, IN THIS CASE EITHER THE PRINCIPAL-AGENT RELATIONSHIP BETWEEN THE PAYEES OF OCEAN FREIGHT AND THE SHIPPING COMPANY HAS NOT BEEN ESTABLISHED OR THE PAYEES HAVE FURTHER GIV EN THE FREIGHT TO AGENTS OF NON RESIDENT SHIPPING COMPANY, THEREBY DEMOLISHING THEIR OWN POS ITION AS AGENTS. IT IS, THEREFORE, EVIDENT THAT THE ADDITION HAS BEEN MADE AS PER THE PROVISIO NS OF LAW. 30 AS SUCH, THE ADDITION OF RS.27,33,461/- IS CONFIRMED, DISMISSING ASSESSEE'S GROUND OF APPEAL. 21. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT T HAT THESE AMOUNTS WERE ALREADY PAID AND THEREFORE PROVISIONS OF SECTI ON 40A(IA) WERE NOT ATTRACTED BECAUSE SAME CAN BE ATTRACTED IF THE AMOU NT WAS PAYABLE. IN THIS REGARD HE REFERRED TO THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN CASE OF CIT V. VECTOR SHIPPING SERVICES (P) LTD, ITA NO. 122/2013. HE FURTHER SUBMITTED THAT SLP FILED BY THE REVENUE AGAINST THIS DECISION HAS ALREADY BEEN DISMISSED BY THE HON'BLE SUPREME C OURT AND IN THIS REGARD FILED A COPY OF THE ORDER OF THE HON'BLE SUP REME COURT . 22. ON THE OTHER HAND, THE LD. D.R. FOR THE REVENUE STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). FURTHER RELIANCE WAS PLACED ON THE DECISION OF CHANDIGARH BENCH OF THE TRIBUNAL WHEREIN THE DEC ISION IN CASE OF CIT V. SIKANDARKHAN N. TUNVAR & ORS, 87 DTR 137 WAS FOL LOWED AND THE DECISION OF CIT V. VECTOR SHIPPING SERVICES (P) LTD (SUPRA) AND IN CASE OF HI TECH FOODS V ITO IN ITAS NO. 987, 988 & 989/C HD/2011 WERE DISTINGUISHED. 9 23. WE FIND THAT SIMILAR ISSUE WAS RAISED IN THE CA SE OF SISTER CONCERN OF THE ASSESSEE IN CROSS OBJECTIONS FILED BY THE AS SESSEE BEARING C.O.NO.20/CHD/2011 RELATING TO ASSESSMENT YEAR 2006 -07 WHICH WERE HEARD ALONGWITH THE APPEAL OF THE REVENUE IN CIT, C IRCLE-II, VS. M/S RANA SUGARS LTD. IN ITA NO.48/CHD/2011 RELATING TO ASSESSMENT YEAR 2006-07. THE TRIBUNAL VIDE ORDER DATED 8.8.2014 H ELD AS UNDER: 28. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREF ULLY. WE FIND THAT HON'BLE GUJARAT HIGH COURT IN CASE OF CIT V. SIKAND ARKHAN N. TUNVAR & ORS, SUPRA) HAS HELD THAT PROVISIONS OF SECTION 40A (IA) ARE APPLICABLE WHERE THE AMOUNT HAS BEEN PAID OR REMAIN PAYABLE. IN CONTRAST HON'BLE ALLAHABAD HIGH COURT IN CASE OF CIT V. VECTOR SHIP PING SERVICES (P) LTD (SUPRA), HAS FOLLOWED THE DECISION OF SPECIAL B ENCH IN CASE OF MERILIN SHIPPING & TRANSPORT V ADDL CIT, 136 ITD 23 (VISAKHAPATNAM)(SB). BOTH THESE DECISIONS WERE CONS IDERED BY US IN CASE OF HI TECH FOODS V ITO (SUPRA) AND IT WAS OBSE RVED AT PARA 22 TO 27 AS UNDER: 22 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY AN D FIND THAT THE DECISION OF SPECIAL BENCH HAS BEEN SPECIFICALL Y OVER RULED BY HON'BLE GUJARAT HIGH COURT BY DISCUSSING THE ISSUE IN DETAIL IN CASE OF CIT V. SIKANDARKHAN N TUNWAR AND OTHERS (SU PRA). WE FURTHER FIND THAT IN CASE OF CIT V. VECTOR SHIPPING SERVICES, THE ISSUE WAS DIFFERENT. IN THAT CASE THE QUESTION POS ED BEFORE THE HON'BLE HIGH COURT READS AS UNDER: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE HON'BLE ITAT HAS RIGHTLY CONFIRMED THE ORDER OF THE LD. CIT(A) AND THEREBY DELETING THE DISALLOWANCE OF RS. 1,17,68,62 1/- MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) OF THE IT ACT BY IG NORING THE FACT THAT THE COMPANY M/S MERCATOR LINES LTD. HAD PERFOR MED SHIP MANAGEMENT WORK ON BEHALF OF THE ASSESSEE M/S VECTO R SHIPPING SERVICES (P) LTD AND THERE WAS A MEMORANDUM OF UNDE RTAKING SIGNED BETWEEN BOTH THE COMPANIES AND A S PER THE D EFINITION OF MEMORANDUM OF UNDERTAKING, IT INCLUDED CONTRACT ALS O. IN THAT CASE SOME EXPENSES WERE DISALLOWED U/S 40(A )(IA) BECAUSE NOT TAX WAS DEDUCTED. ON APPEAL THE TRIBUNAL FOUND THAT THE LD. CIT(A) HAS ALREADY GIVEN A FINDING THAT MERCATOR LI NES LTD. HAD DEDUCTED THE TDS ON SALARY PAID ON BEHALF OF THE AS SESSEE. UNDER SUCH CIRCUMSTANCES THE ASSESSEE WAS NOT REQUIRED TO DEDUCT THE TDS ON REIMBURSEMENT ON SALARY BEING MADE BY IT TO M/S MERCATOR LINES LTD. 23 HON'BLE HIGH COURT HAS CONFIRMED THE DECISION OF THE TRIBUNAL. THUS IT IS CLEAR THAT HON'BLE ALLAHABAD HIGH COURT WAS NEITHER REQUIRED NOR HAS GIVEN DETAIL REASONS FOR APPROVING THE DECISION OF SPECIAL BENCH WHEREAS HON'BLE GUJARAT H IGH COURT HAS AFTER DETAILED DISCUSSION, OVER RULED THE DECISION OF SPECIAL BENCH. 24 IN CASE OF SIKANDARKHAN N TUNWAR (SUPRA) THE ASS ESSEE WAS ENGAGED IN THE BUSINESS OF TRANSPORT CONTRACTOR AND COMMISSION 10 AGENT. DURING THE SCRUTINY ASSESSMENT IT WAS NOTI CED BY THE ASSESSING OFFICER THAT EXPENDITURE IN THE NATURE OF PAYMENT MADE BY THE ASSESSEE TO ITS SUB-CONTRACTORS TO THE TUNE OF RS. 8.74 CRORES. SINCE THE ASSESSEE HAD ADMITTEDLY NOT DEDU CTED THE TAX FROM SUCH PAYMENTS AND INDIVIDUAL PAYMENTS TO TRANS PORTERS EXCEEDED LIMIT OF RS. 20,000/- FOR A SINGLE TRIP AN D AGGREGATED OVER RS. 50,000/- IN THE YEAR THOUGH THE ASSESSEE H AD OBTAINED FORM NO. 15-I FROM SUCH SUB-CONTRACTORS BUT THE SAM E WERE NOT FURNISHED ALONG WITH THE PARTICULARS IN FORM 15-J T O THE CIT BEFORE DUE DATE AND THEREFORE, THE EXPENDITURE ON ACCOUNT OF PAYMENT TO SUB-CONTRACTORS WAS DISALLOWED BY INVOKI NG THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 25. ON APPEAL THE LD. CIT(A) CONFIRMED THIS ORDER. 26 WHEN THE MATTER TRAVELED TO THE TRIBUNAL THE APP EAL OF THE ASSESSEE WAS ALLOWED BY RELYING ON THE DECISION OF MERILYN SHIPPING TRANSPORTERS V. ACIT (SUPRA). THE TRIBUNA L HELD THAT THE WORD PAYABLE USED IN SECTION 40(A)()IA) WOULD MAK E PROVISION APPLICABLE ONLY IN RESPECT OF EXPENDITURE PAYABLE ON 31 ST MARCH OF A PARTICULAR YEAR AND SUCH PROVISION CANNOT BE I NVOKED TO DISALLOW THE AMOUNTS WHICH HAS ALREADY BEEN PAID DU RING THE YEAR THOUGH THE TAX MAY NOT HAVE BEEN DEDUCTED AT SOURCE . FOLLOWING SPECIFIC QUESTION WAS POSED BEFORE THE HON'BLE HIGH COURT: IN ALL THESE APPEALS THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE SPECIAL BENCH IN THE CASE OF M/S MERILYN SHIPPING T RANSPORTERS V. ACIT (SUPRA) AND DELETED THE DISALLOWANCE ON THIS L IMITED GROUND. AS IN THE PRESENT CASE, OTHER MERILYN SHIPPING TRAN SPORTERS V. ACIT (SUPRA) GROUNDS OF CONTROVERSY BETWEEN THE PAR TIES WITH RESPECT TO ALLOWABILITY OR OTHERWISE OF SUCH EXPEND ITURE WAS NOT EXAMINED BY THE TRIBUNAL. FOR THE PURPOSE OF THESE APPEALS, THEREFORE, WE FRAME FOLLOWING SUBSTANTIAL QUESTION OF LAW: 1 WHETHER DISALLOWANCE U/S 40(A)(IA) OF THE I.T AC T COULD BE MADE ONLY IN RESPECT OF SUCH AMOUNTS WHICH ARE PAY ABLE AS ON 31 ST MACH OF THE YEAR UNDER CONSIDERATION? 2 WHETHER DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPING TRANSPORTERS V. ACIT (SUPRA ) LAYS DOWN CORRECT LAW? 27 HON'BLE GUJARAT HIGH COURT AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES REFERRED TO THE PRO VISION OF CHAPTER XVII A OF THE ACT DEALING WITH THE TAX DEDU CTION PROVISIONS. AFTER THIS REFERENCE WAS MADE TO SECTI ON 40(A)(IA) THROUGH WHICH IT WAS PROVIDED THAT TAX HAS NOT BEEN DEDUCTED ON CERTAIN PAYMENTS AND THE SAME WILL NOT BE ALLOWABLE . THE HON'BLE HIGH COURT DISCUSSED THE IMPLEMENTATIONS OF THIS PR OVISION AND DECISION OF SPECIAL BENCH IN CASE OF MERILYN SHIPPI NG TRANSPORTERS V. ACIT (SUPRA) AND OBSERVED AND HELD AS UNDER: 11 17. IN PLAIN TERMS SECTION 40(A)(IA) PROVIDES THAT IN CASE OF ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, F EES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB -CONTRACTOR FOR CARRYING OUT ANY WORK ON WHICH TAX IS DEDUCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION H AS NOT BEEN PAID BEFORE THE DUE DATE, SUCH AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION IRRESPECTIVE OF THE PROVISIONS CONTAINED IN SECTIONS 30 TO 38 OF THE ACT. PROVISO TO SECTION 40(A)(IA), HOWEVER, ENABLES THE ASSESSEE TO TAKE SU CH DEDUCTION IN SUBSEQUENT YEAR, IF TAX IS DEDUCTED IN SUCH YEAR OR THOUGH DEDUCTED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DAT E SPECIFIED IN SUB-SECTION(1) OF SECTION 139 OF THE ACT. 18. IN SUCH CONTEXT, THEREFORE, THE QUESTION ARISES WHETHER UNDER SECTION 40(A)(IA) OF THE ACT DISALLOWANCE OF THE EX PENDITURE PAYMENT OF WHICH, THOUGH REQUIRED DEDUCTION OF TAX AT SOURCE HAS NOT BEEN MADE WOULD BE CONFINED ONLY TO THOSE CASES WHERE THE AMOUNT REMAINS 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 SPECIAL BENCH BY A SPLI T OPINION. LEARNED ACCOUNTANT MEMBER WHO WAS IN MINOR ITY, PLACED HEAVY RELIANCE ON A DECISION OF MADRAS HIGH COURT I N THE CASE OF TUBE INVESTMENTS OF INDIA LTD. AND ANOTHER VS. ASSI STANT COMMISSIONER OF INCOME-TAX (TDS) AND OTHERS REPORTED IN [2010] 325 ITR 610 (MAD) . LEARNED JUDGE DID NOTICE THAT THE HIGH COURT IN SUCH CASE WAS CONCERNED WITH THE VIRES OF THE ST ATUTORY PROVISION BUT FOUND SOME OF THE OBSERVATIONS MADE B Y THE COURT IN THE PROCESS USEFUL AND APPLICABLE. LEARNED JUDGE RE JECTED THE THEORY OF NARROW INTERPRETATION OF TERM PAYABLE AND OBSERVED AS UNDER: 12.4 IN OUR CONSIDERED OPINION, THERE IS NO AMBIGUI TY 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 31 ST MARCH, THEN THE TERM PAYABLE WOULD HAVE BEEN QUALIFIED BY THE PHRASE AS OUTSTAND ING ON 31 ST MARCH. HOWEVER, NO SUCH QUALIFICATION IS THERE IN THE SECTION AND, THEREFORE, THE SAME CANNOT BE READ INT O THE SECTION AS CONTENDED BY THE ASSESSEE. 20. ON THE OTHER HAND, LEARNED JUDICIAL MEMBER SPEA KING FOR MAJORITY ADOPTED A STRICTER INTERPRETATION. HEAVY R ELIANCE WAS PLACED ON THE FINANCE BILL OF 2004, WHICH INCLUDED THE DRAFT OF THE AMENDMENT IN SECTION 40 AND THE ULTIMATE AMENDMENT WHICH ACTUALLY WAS PASSED BY THE PARLIAMENT. IT WAS OBSER VED THAT FROM THE COMPARISON BETWEEN THE PROPOSED AND THE ENACTED PROVISION IT CAN BE SEEN THAT THE LEGISLATURE HAS REPLACED THE W ORDS AMOUNTS CREDITED OR PAID WITH THE WORD PAYABLE IN THE ENACTMENT. ON SUCH BASIS, IT WAS HELD THAT THIS IS A CASE OF CONS CIOUS OMISSION AND WHEN THE LANGUAGE WAS CLEAR THE INTENTION OF TH E LEGISLATURE HAD TO BE GATHERED FROM LANGUAGE USED. IN THEIR OPI NION THE 12 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 THE ACT LAYS DOWN T HAT EARLIER YEAR S PROVISION CAN BE ALLOWED IN SUBSEQUENT YEARS ONLY IF TDS IS DEDUCTED AND DEPOSITED AND, THEREFORE, REVENUE S FEAR IS UNFOUNDED AS THE PROVISION OF SECTION 40(A)(IA) OF THE ACT COVERS THE SITUATION. 21. IN THE PRESENT CASE, WE HAVE NO HESITATION IN A CCEPTING THE CONTENTION THAT THE PROVISION MUST BE CONSTRUED STR ICTLY. THIS BEING A PROVISION WHICH CREATES AN ARTIFICIAL CHARGE ON A N AMOUNT WHICH IS OTHERWISE NOT AN INCOME OF THE ASSESSEE, CANNOT BE LIBERALLY CONSTRUED. UNDOUBTEDLY IF THE LANGUAGE OF THE SECTI ON IS PLAIN, IT MUST BE GIVEN ITS TRUE MEANING IRRESPECTIVE OF THE CONSEQUENCES. WE HAVE NOTICED THAT THE PROVISION MAKES DISALLOWAN CE OF AN EXPENDITURE WHICH HAS OTHERWISE BEEN INCURRED AND I S ELIGIBLE FOR DEDUCTION, ON THE GROUND THAT THOUGH TAX WAS REQUIR ED TO BE DEDUCTED AT SOURCE IT WAS NOT DEDUCTED OR IF DEDUCT ED, 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 NOT SO PERMIT . 22. FOR THE PURPOSE OF THE SAID SECTION, WE ARE ALS O 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 ME AN ACTUALLY PAID OR INCURRED ACCORDING TO THE METHOD O F ACCOUNTING, UPON THE BASIS OF WHICH PROFITS AND GAINS ARE COMPU TED 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 CONTRAST, 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: CAPABLE OF BEING PAID: SPECIF YING PAYMENT TO A PARTICULAR PAYEE AT A SPECIFIED TIME OR OCCASION OR ANY SPECIFIED MANNER. IN THE CONTEXT OF SECTION 40(A)(IA), THE WO RD PAYABLE WOULD NOT INCLUDE PAID . IN OTHER WORDS, THEREFORE, AN AMOUNT WHICH IS ALREADY PAID OVER CEASES TO BE PAYABLE AND CONVERSELY WHAT IS PAYABLE CANNOT BE ONE THAT IS ALREADY PAID. WHEN AS RIGHTLY POINTED OUT BY COUNSEL MR. HEMANI, THE ACT USES TER MS PAID AND PAYABLE AT DIFFERENT PLACES IN DIFFERENT CONTEXT DIFFERENT LY, FOR THE PURPOSE OF SECTION 40(A)(IA) OF THE ACT, TE RM PAYABLE CANNOT BE SEEN TO BE INCLUDING THE EXPRESSION PAID . THE TERM PAID AND PAYABLE IN THE CONTEXT OF SECTION 40(A)(IA) ARE NOT USED INTERCHANGABLY. IN THE CASE OF BIRLA CEMENT WORKS AND 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 ORDINARILY MEANS THAT WHI CH MUST BE PAID OR IS DUE OR MAY BE PAID BUT ITS CORRECT MEANI NG CAN ONLY BE DETERMINED IF THE CONTEXT IN WHICH IT IS USED IS KE PT IN VIEW. THE WORD HAS BEEN FREQUENTLY UNDERSTOOD TO MEAN THAT WH ICH MAY, CAN OR SHOULD BE PAID AND IS HELD EQUIVALENT TO DUE . 23. DESPITE THIS NARROW INTERPRETATION OF SECTION 4 0(A)(IA), THE QUESTION STILL SURVIVES IF THE TRIBUNAL IN CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) WAS ACCURATE IN ITS OPINION. IN THIS CONTEXT, WE WOULD LIKE TO EXAMINE TWO ASPECTS. FIRSTLY, WHAT WOULD BE THE CORRECT INTERPRETATION O F THE SAID 13 PROVISION. SECONDLY, WHETHER OUR SUCH UNDERSTANDING OF THE LANGUAGE USED BY THE LEGISLATURE SHOULD WAVER ON TH E PREMISE THAT AS PROPOUNDED BY THE TRIBUNAL, THIS WAS A CASE OF C ONSCIOUS OMISSION ON PART OF THE PARLIAMENT. BOTH THESE ASPE CTS WE WOULD ADDRESS ONE AFTER ANOTHER. IF ONE LOOKS CLOSELY TO THE PROVISION, IN QUESTION, ADVERSE CONSEQUENCES OF NOT BEING ABLE TO CLAIM DEDUCTION ON CERTAIN PAYMENTS IRRESPECTIVE OF THE P ROVISIONS CONTAINED IN SECTIONS 30 TO 38 OF THE ACT WOULD FLO W IF THE FOLLOWING 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 SUB- CONTRACTOR BEING RESIDENT FOR CARRYING OUT ANY WORK. (B) THESE AMOUNTS ARE SUCH ON WHICH TAX IS DEDUCTIB LE AT SOURCE UNDER CHAPTER XVII-B. (C)SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTIO N HAS NOT BEEN PAID ON OR BEFORE DUE DATE SPECIFIED IN 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 T HAT THERE SHOULD BE AN `AMOUNT PAYABLE IN THE NATURE DESCRIBED ABOVE , WHICH IS SUCH ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHA PTER XVII-B BUT SUCH TAX HAS NOT BEEN DEDUCTED OR IF DEDUCTED N OT PAID BEFORE THE DUE DATE. THIS PROVISION NO-WHERE REQUIRES THAT THE AMOUNT WHICH IS PAYABLE MUST REMAIN SO PAYABLE THROUGHOUT DURING THE YEAR. TO REITERATE THE PROVISION HAS CERTAIN STRICT AND STRINGENT REQUIREMENTS BEFORE THE UNPLEASANT CONSEQUENCES ENV ISAGED THEREIN CAN BE APPLIED. WE ARE PREPARED TO AND WE ARE DUTY BOUND TO INTERPRET SUCH REQUIREMENTS STRICTLY. SUCH REQUIREM ENTS, HOWEVER, CANNOT BE ENLARGED BY ANY ADDITION OR SUBTRACTION O F WORDS NOT USED BY THE LEGISLATURE. THE TERM USED IS INTEREST, COMMISSION, BROKERAGE ETC. IS PAYABLE TO A RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR FOR CARRYING OUT ANY W ORK. THE LANGUAGE USED IS NOT THAT SUCH AMOUNT MUST CONTINUE TO REMAIN PAYABLE TILL THE END OF THE ACCOUNTING YEAR. ANY SU CH INTERPRETATION WOULD REQUIRE READING WORDS WHICH THE LEGISLATURE H AS NOT USED. NO SUCH INTERPRETATION WOULD EVEN OTHERWISE BE JUST IFIED BECAUSE IN OUR OPINION, THE LEGISLATURE COULD NOT HAVE INTE NDED TO BRING ABOUT ANY SUCH DISTINCTION NOR THE LANGUAGE USED IN THE SECTION BRINGS ABOUT ANY SUCH MEANING. IF THE INTERPRETATIO N AS ADVANCED BY THE ASSESSEES IS ACCEPTED, IT WOULD LEAD TO A SI TUATION WHERE THE ASSESSEE WHO THOUGH WAS REQUIRED TO DEDUCT THE TAX AT SOURCE BUT NO SUCH DEDUCTION WAS MADE OR MORE FLAGRANTLY DEDUC TION THOUGH MADE IS NOT PAID TO THE GOVERNMENT, WOULD ESCAPE TH E CONSEQUENCE ONLY BECAUSE THE AMOUNT WAS ALREADY PAID OVER BEFOR E 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 BRING ABOUT SUCH IRRECONCILABLE AND DIVERSE CONSEQUENCES. WE HASTEN TO ADD THAT THI S IS NOT THE PRIME BASIS ON WHICH WE HAVE ADOPTED THE INTERPRETA TION WHICH WE 14 HAVE GIVEN. IF THE LANGUAGE 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 INCO NGRUOUS AND SEEMINGLY IRRECONCILABLE CONSEQUENCES. THE DECISION OF THE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX, GUJARAT VS. ASHOKBHAI CHIMANBHAI (SUPRA), WOULD NOT ALTER THIS SITUATION. THE SAID DECISION, OF COURSE, RECOGNIZES THE CONCEPT OF ASCERTAINING THE PROFIT AND LOSS FROM THE BUSINESS OR PROFESSION WITH REFERENCE TO A CERTAIN PERIOD I.E. THE ACCOUNT ING YEAR. IN THIS CONTEXT, LAST DATE OF SUCH ACCOUNTING PERIOD WOULD ASSUME CONSIDERABLE SIGNIFICANCE. HOWEVER, THIS DECISION N OWHERE INDICATES THAT THE EVENTS WHICH TAKE PLACE DURING T HE ACCOUNTING PERIOD SHOULD BE IGNORED AND THE ASCERTAINMENT OF F ULFILLING A CERTAIN CONDITION PROVIDED UNDER THE STATUTE MUST B E JUDGED WITH REFERENCE TO LAST DATE OF THE ACCOUNTING PERIOD. PA RTICULARLY, 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 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 BE JUD GED WITH REFERENCE TO SUCH DATE, DOES NOT MEAN THAT WHETHER AN AMOUNT IS PAYABLE OR NOT MUST BE ASCERTAINED ON THE STRENGTH OF THE POSITION EMERGING ON 31 ST MARCH. 25. THIS BRINGS US TO THE SECOND ASPECT OF THIS DIS CUSSION, NAMELY, WHETHER THIS IS A CASE OF CONSCIOUS OMISSION AND TH EREFORE, THE LEGISLATURE MUST BE SEEN TO HAVE DELIBERATELY BROUG HT ABOUT A CERTAIN SITUATION WHICH DOES NOT REQUIRE ANY FURTHE R INTERPRETATION. THIS IS THE FUNDAMENTAL ARGUMENT 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 HYDEN S RULE OR THE MISCHIEF RULE AND ASCERTAINED WHAT WAS THE POSITION BEFORE THE AMENDMENT, WHAT THE AME NDMENT SOUGHT TO REMEDY AND WHAT WAS THE EFFECT OF THE CHANGES. 27. IN THE CASE OF BENGAL IMMUNITY CO. LTD. VS. STATE OF BIHAR AND OTHERS REPORTED IN AIR 1955 SC 661 , THE APEX COURT REFERRED TO THE FAMOUS ENGLISH DECISION IN HYDEN S CASE WHEREIN WHILE ADOPTING RESTRICTIVE OR ENLARGING INTERPRETATION, I T 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 REME DY THE PARLIAMENT HAD RESOLVED AND ADOPTED TO CURE THE DIS EASE 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 RE LEVANT FACTOR. HOWEVER, THE PROCEEDINGS IN THE PARLIAMENT, ITS DEB ATES AND EVEN THE SPEECHES MADE BY THE PROPOSER OF A BILL ARE ORD INARILY NOT CONSIDERED AS RELEVANT OR SAFE TOOLS FOR INTERPRETA TION OF A STATUTE. IN THE CASE OF ASWINI KUMAR GHOSE AND ANOTHER VS. ARABINDA BOSE AND ANOTHER REPORTED IN A.I.R. 1952 SC 369 IN A CONSTITUTION BENCH DECISION OF (CORAM: PATANJALI SASTRI, C.J.) , OBSERVED THAT:- 15 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 THE 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. THE REASON WHY A PARTICULAR AMENDMENT WAS PROPOSED OR ACCEPTED OR REJECTED IS OFTEN A MATTER OF CONTROVERSY, AS IT HAPPENED TO BE IN THIS CASE, AND WITHOUT THE SPEECHES BEARING UPON THE MOTION, IT CANNOT BE ASCERTAINED WITH 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 RESORTED TO BY THE PARTIES IN THE CASE MUS BE EXCLUDED FROM CONSIDERATION IN ASCERTAINING THE TRUE OBJECT AND INTENTION OF THE LEGISLATURE. 29. IN YET ANOTHER CONSTITUTION BENCH JUDGMENT IN T HE 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 IS RAISED WHETHE R A CERTAIN PHRASE OR EXPRESSION WAS UP FOR CONSIDERATION AT AL L OR NOT, A REFERENCE TO THE DEBATES 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 UNDER:- 173. WE DO NOT PROPOSE TO ENTER INTO ANY ELABORATE DISCUSSION ON THE QUESTION WHETHER IT WOULD BE COMPETENT TO US IN ARRIVING AT A PROPER CONSTRUCTION OF THE EXPRESSION 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 CIRCUMSTANCES UNDER WHICH THE WORD MINIMUM CAME TO BE DELETED FROM THE PROVISIONS OF THE BILL RELATING TO RATES OF WAGES AND THE WAGE BOARD AND THE FACT OF S UCH DELETION WHEN THE ACT 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 MEANING ( SEE: ASHVINI KUMAR GHOSH V. ARABINDA BOSE, 1953 SC R 1:(AIR 1952 SC 36 9) (Z24) AND PROVAT KUMAR KAR V. WILLIAM TREVELYAN CURTIEZ P ARKER, AIR 1950 CAL 116 (Z25). IT IS ONLY WHEN THE TERMS OF TH E STATUTE ARE AMBIGUOUS OR VAGUE THAT RESORT MAY BE HAD TO THEM F OR THE PURPOSE OF ARRIVING AT THE TRUE INTENTION OF THE LE GISLATURE. 16 31. IT CAN THUS BE SEEN THAT THE DEBATES IN THE PARLIAMENT ARE ORDINARILY NOT CONSIDERED AS THE AIDS FOR INTERPRET ATION OF THE ULTIMATE PROVISION WHICH MAY BE BROUGHT INTO THE ST ATUTE. THE DEBATES AT BEST INDICATE THE OPINION OF THE INDIVID UAL MEMBERS AND ARE ORDINARILY NOT RELIED UPON 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 CONSTITUENT ASSEMBLY AND IN CASE OF FINANCE MIN ISTER S SPEECH EXPLAINING THE REASON FOR INTRODUCTION OF A CERTAIN PROVISION. THE REASON WHY A CERTAIN LANGUAGE WAS USED IN A DRAFT B ILL AND WHY THE PROVISION ULTIMATELY ENACTED CARRIED A DIFFERENT EX PRESSION CANNOT BE GATHERED FROM MERE COMPARISON OF THE TWO SETS OF PROVISIONS. THERE MAY BE VARIETY OF REASONS WHY THE ULTIMATE PR OVISION MAY VARY FROM THE ORIGINAL DRAFT. IN THE PARLIAMENTARY SYSTEM, TWO HOUSES SEPARATELY DEBATE THE LEGISLATIONS UNDER CON SIDERATION. IT WOULD ALL THE MORE BE UNSAFE TO REFER TO OR RELY UP ON THE DRAFTS, AMENDMENTS, DEBATES ETC FOR INTERPRETATION OF A STA TUTORY PROVISION WHEN THE LANGUAGE USED IS NOT CAPABLE OF SEVERAL ME ANINGS. IN THE PRESENT CASE THE TRIBUNAL IN CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) FELL IN A SERIOUS ERROR IN MERELY COMPARING THE LANGUAGE USED IN THE DRAFT BILL AND F INAL ENACTMENT TO ASSIGN A PARTICULAR MEANING TO THE STATUTORY PRO VISION. 32. IT IS, OF COURSE, TRUE THAT THE COURTS IN INDIA HAVE BEEN APPLYING THE PRINCIPLE OF DELIBERATE OR CONSCIOUS O MISSION. SUCH PRINCIPLE IS APPLIED MAINLY WHEN AN EXISTING PROVIS ION IS AMENDED AND A CHANGE IS BROUGHT ABOUT. WHILE INTERPRETING S UCH AN AMENDED PROVISION, THE COURTS WOULD IMMEDIATELY INQ UIRE WHAT WAS THE STATUTORY PROVISION BEFORE AND WHAT CHANGES THE LEGISLATURE BROUGHT ABOUT AND COMPARE THE EFFECT OF THE TWO. TH E OTHER OCCASION FOR APPLYING THE PRINCIPLE, WE NOTICE FROM VARIOUS DECISIONS OF THE SUPREME COURT, HAS BEEN WHEN THE L ANGUAGE OF THE LEGISLATURE IS COMPARED WITH SOME OTHER ANALOGOUS S TATUTE 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 PROVISION. WE MAY REFER TO SOME OF SUCH DECISIONS PRESENTLY. IN THE CASE OF BHUWALKA STEEL INDUSTRIES LTD. VS. BOMBAY IRON AND STEEL LABOUR BO ARD 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 PROTECTION TO ALL THE LABOURERS OR WORKERS, WHO WER E THE MANUAL WORKERS AND WERE ENGAGED OR TO BE ENGAGED IN ANY SCHEDULED EMPLOYMENT. THEREFORE, THERE WAS A SPECIF IC ACT ON THE PART OF THE LEGISLATURE TO ENLARGE THE SCOPE OF THE DEFINITION AND ONCE WE ACCEPT THIS, ALL THE ARGUMEN TS REGARDING THE OBJECTS AND REASONS, THE COMMITTEE RE PORTS, THE LEGISLATIVE HISTORY BEING CONTRARY TO THE EXPRE SS LANGUAGE, ARE RELEGATED TO THE BACKGROUND AND ARE L IABLE TO BE IGNORED. 33. IN THE CASE OF AGRICULTURAL PRODUCE MARKET COMMITTEE, NARELA, DELHI VS. COMMISSIONER OF INCOME TAX AND AN R. REPORTED IN AIR 2008 SC(SUPPLEMENT) 566 , THE SUPREME COURT NOTICED THAT PRIOR TO FINANCE ACT, 2002, THE INCOME TAX ACT DID NOT CONTAIN THE 17 DEFINITION OF WORDS LOCAL AUTHORITY . THE WORD CAME TO BE DEFINED FOR THE FIRST TIME BY THE FINANCE ACT OF 20 02 BY EXPLANATION/ DEFINITION CLAUSE TO SECTION 10(20) OF THE ACT. IT WAS FURTHER NOTICED THAT THERE WERE SIGNIFICANT DIFFERE NCE IN THE DEFINITION OF TERM LOCAL AUTHORITY CONTAINED UNDER SECTION 3(31) OF THE GENERAL CLAUSES ACT, 1987 AS COMPARED TO THE DEFINITION CLAUSE INSERTED IN SECTION 10(20) OF THE INCOME TAX ACT, 1961 VIDE FINANCE ACT, OF 2002. IN THIS CONTEXT IT WAS OBSERV ED 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 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 CORRE CT TO SAY THAT THE ENTIRE DEFINITION OF THE WORD LOCAL AUTHORITY IS BODILY LIFTED FROM SECTION 3(31) 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 CO-OPERATIVE 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 F ALL WITHIN THE MEANING 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 B Y ACT NO.23 OF 1965 BY ADDITION OF SOME MORE CLAUSES IN S ECTION 56 OF THE ACT. THE PARLIAMENT WAS FULLY AWARE THAT THE PROVISIONS OF THE BR ACT APPLY TO CO-OPERATIVE SOCI ETIES 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 1 965 AND IT WAS KEPT INTACT, AND IN FACT ADDITIONAL DEFI NITIONS WERE ADDED BY SECTION 56(C). CO-OPERATIVE BANK WAS SEPARATELY DEFINED BY THE NEWLY INSERTED CLAUSE (CC I) AND PRIMARY CO-OPERATIVE BANK WAS SIMILARLY SEPARATELY DEFINED BY CLAUSE (CCV). THE PARLIAMENT WAS SIMPLY ASSIGNING A MEANING TO WORDS; IT WAS NOT INCORPORAT ING 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 18 NOT DO SO. THERE WAS THUS A CONSCIOUS EXCLUSION AND DELIBERATE COMMISSION OF CO-OPERATIVE BANKS FROM TH E PURVIEW OF THE RDB ACT. THE REASON FOR EXCLUDING CO- OPERATIVE BANKS SEEMS TO BE THAT CO-OPERATIVE BANKS HAVE COMPREHENSIVE, SELF-CONTAINED AND LESS EXPENSIVE RE MEDIES AVAILABLE TO THEM UNDER THE STATE CO-OPERATIVE SOCI ETIES ACTS OF THE STATES CONCERNED, WHILE OTHER BANKS AND FINANCIAL INSTITUTIONS DID NOT HAVE SUCH SPEEDY REM EDIES 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 REPORTED IN AIR 2004 SC 2456 , THE APEX COURT OBSERVED AS UNDER:- 29. THE PARLIAMENT KNOWING IT FULL WELL THAT THE I RON ORE SHALL HAVE TO UNDERGO A PROCESS LEADING TO EMERGENC E OF LUMPS, FINES, CONCENTRATES AND SLIMES CHOSE TO MAKE PROVISION FOR QUANTIFICATION OF ROYALTY ONLY BY REF ERENCE TO THE QUANTITY OF LUMPS, FINES AND CONCENTRATES. IT L EFT SLIMES OUT OF CONSIDERATION. NOTHING PREVENTED THE PARLIAMENT FROM EITHER PROVIDING FOR THE QUANTITY O F IRON ORE AS SUCH AS THE BASIS FOR QUANTIFICATION OF ROYA LTY. IT CHOSE TO MAKE PROVISION FOR THE QUANTIFICATION BEIN G 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 CLE ARLY SUGGESTIVE OF ITS INTENTION NOT TO TAKE INTO CONSID ERATION SLIMES FOR QUANTIFYING THE AMOUNT OF ROYALTY. THIS DELIBERATE OMISSION OF PARLIAMENT CANNOT BE MADE GO OD BY INTERPRETATIVE PROCESS SO AS TO CHARGE ROYALTY O N 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 QU ESTION WOULD STILL HAVE REMAINED AT WHAT RATE AND ON WHAT QUANTITY WHICH QUESTIONS CANNOT BE ANSWERED BY SECT ION 9. 36. IN THE CASE OF GOPAL SARDAR, VS. KARUNA SARDAR REPORTED IN AIR 2004 SC 3068 , THE APEX COURT IN THE THE CONTEXT OF LIMITATION WITHIN WHICH RIGHT OF PREEMPTION MUST BE EXERCISED AND WHETHER IN THE CONTEXT OF THE RELEVANT PROVISIONS CONTAINED IN WEST BENGAL LAND REFORMS AND LIMITATION ACT, 1963 APPLIED OR NO T, OBSERVED AS UNDER:- 8....PRIOR TO 15-2-1971, AN APPLICATION UNDER SECTI ON 8 WAS REQUIRED TO BE MADE TO THE REVENUE OFFICER SPECIFICALLY EMPOWERED BY THE STATE GOVERNMENT IN T HIS BEHALF. THIS PHRASE WAS SUBSTITUTED BY THE PHRASE MUNSIF HAVING TERRITORIAL JURISDICTION BY THE AFOREMENTIONED AMENDMENT. EVEN AFTER THIS AMENDMENT WHEN AN APPLICATION IS REQUIRED TO BE MADE TO SECTI ON 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 LIMIT ATION 19 PRESCRIBED ON SHOWING SUFFICIENT CAUSE FOR NOT MAKI NG AN APPLICATION WITHIN TIME. THE ACT IS OF 1955 AND FOR ALL THESE YEARS, NO PROVISION IS MADE UNDER SECTION 8 O F THE ACT PROVIDING FOR CONDONATION OF DELAY. THUS, WHEN SECTION 5 OF THE LIMITATION ACT IS NOT MADE APPLICA BLE TO THE PROCEEDINGS UNDER SECTION 8 OF THE ACT UNLIKE T O THE OTHER PROCEEDINGS UNDER THE ACT, AS ALREADY STATED ABOVE, IT IS APPROPRIATE TO CONSTRUE THAT THE PERIOD OF LI MITATION PRESCRIBED UNDER SECTION 8 OF THE ACT SPECIFICALLY AND EXPRESSLY GOVERNS AN APPLICATION TO BE MADE UNDER T HE SAID SECTION AND NOT THE PERIOD PRESCRIBED UNDER AR TICLE 137 OF THE LIMITATION ACT . 37. IN OUR OPINION, THE TRIBUNAL COMMITTED AN ERROR IN APPLYING THE PRINCIPLE OF CONSCIOUS OMISSION IN THE PRESENT CASE. FIRSTLY, AS ALREADY OBSERVED, WE HAVE SERIOUS DOUBT WHETHER SUCH PRINCIPLE CAN BE APPLIED BY COMPARING THE DRAFT PRE SENTED IN PARLIAMENT AND ULTIMATE LEGISLATION WHICH MAY BE PA SSED. SECONDLY, THE STATUTORY PROVISION IS AMPLY CLEAR. 38. IN THE RESULT, WE ARE OF THE OPINION THAT SECTI ON 40(A)(IA) WOULD COVER NOT ONLY TO THE AMOUNTS WHICH ARE PAYAB LE AS ON 31 TH MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. OF COURSE, AS LONG AS THE OTHER REQUIREMENTS 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 (SURPA), DOES NOT LAY 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. THUS IT IS CLEAR THAT HON'BLE GUJARAT HIGH COURT HA S CONSIDERED ALL ASPECTS OF THE ISSUES RAISED IN THE DECISION OF SPE CIAL BENCH IN CASE OF MERILYN SHIPPING TRANSPORTERS V. ACIT (SUPR A). WE FURTHER FIND THAT THAT EVEN HON'BLE CALCUTTA HIGH C OURT HAS OVERRULED THIS DECISION IN CASE OF CIT VS. CRESENT EXPORT SYNDICATE. MOREOVER CHANDIGARH BENCH OF THE TRIBUNA L CONSISTENTLY HAS BEEN FOLLOWING THE DECISION OF HON 'BLE GUJARAT HIGH COURT IN CASE OF CIT V. SIKANDARKHAN N TUNWAR AND OTHERS (SUPRA) AS WELL AS THE DECISION OF HON'BLE CALCUTT A HIGH COURT IN CASE OF CIT VS. CRESENT EXPORT SYNDICATE (SUPRA). 25 NOW THE QUESTION ARISES WHETHER DISMISSAL OF SLP BY HON'BLE SUPREME COURT IN CASE OF CIT V. VECTOR SHIPPING SE RVICES (P) LTD (SUPRA) WOULD CHANGE THE ABOVE LEGAL POSITION. WE ARE AFRAID THE ANSWER IS NO. THE HON'BLE SUPREME COURT HAD ITS ELF CONSIDERED THE ISSUE IN CASE OF V.M. SALGAOCAR AND BROS. PVT LTD V . CIT, 243 ITR 383. IT WAS OBSERVED BY THE COURT ON THIS ISSUE AS UNDER : DIFFERENT CONSIDERATIONS APPLY WHEN A SPECIAL LEA VE PETITION UNDER ARTICLE 136 OF THE CONSTITUTION IS SIMPLY DISMISSED BY SAYING DISMIS SED, AND AN APPEAL PROVIDED UNDER ARTICLE 133 IS DISMISSED ALSO WITH THE WORDS THE A PPEAL IS DISMISSED. IN THE FORMER CASE IT HAS BEEN LAID DOWN BY THIS COURT THAT WHEN A SPECIAL LEAVE PETITION IS DISMISSED 20 THIS COURT DOES NOT COMMENT ON THE CORRECTNESS OR O THERWISE OF THE ORDER FROM WHICH LEAVE TO APPEAL IS SOUGHT. BUT WHAT THE COURT MEANS IS THAT IT DOES NOT CONSIDER IT TO BE A FIT CASE FOR EXERCISE OF ITS JURISDICTION UNDER ART ICLE 136 OF THE CONSTITUTION. THAT CERTAINLY COULD NOT BE SO WHEN AN APPEAL IS DISMISS ED THOUGH BY A NON-SPEAKING ORDER. HERE THE DOCTRINE OF MERGER APPLIES. IN THAT CASE, THE SUPREME COURT UPHOLDS THE DECISION OF THE HIGH COURT OR THE TRIBUNAL FROM WHI CH THE APPEAL IS PROVIDED UNDER CLAUSE (3) OF ARTICLE 133. THIS DOCTRINE OF MERGER DOES NOT APPLY IN THE CASE OF DISMISSAL OF A SPECIAL LEAVE PETITION UNDER ARTICLE 136. WHEN AN APPEAL IS DISMISSED THE ORDER OF THE HIGH COURT IS MERGED WITH THAT OF THE SUPREME C OURT. WE QUOTE THE FOLLOWING PARAGRAPH FROM THE JUDGMENT OF THIS COURT IN THE CA SE OF SUPREME COURT EMPLOYEES WELFARE ASSOCIATION V. UNION OF INDIA, AIR 1990 HON 'BLE SUPREME COURT 334; [1989] 4 SCC 187 (AT PAGE 344 OF AIR 1990 S.C): 22. IT HAS BEEN ALREADY NOTICE THAT THE SPECIAL LE AVE PETITION FILED ON BEHALF OF THE UNION OF INDIA AGAINST THE SAID JUDGMENTS OF THE DE LHI HIGH COURT WERE SUMMARILY DISMISSED BY THIS COURT. IT IS NOW A WELL SETTLED P RINCIPLE OF LAW THAT WHEN A SPECIAL LEAVE PETITION IS SUMMARILY DISMISSED UNDER ARTICLE 136 OF THE CONSTITUTION, BY SUCH DISMISSAL THIS COURT DOES NOT LAY DOWN ANY LAW, AS ENVISAGED BY ARTICLE 141 OF THE CONSTITUTION, AS CONTENDED BY THE LEARNED ATTORNEY- GENERAL. IN INDIAN OIL CORPORATION LTD. V. STATE OF BIHAR [1987] 167 ITR 897; [1986] 4 SCC 146; AIR 1986 HON'BLE SUPREME COURT 1780, IT HAS BEEN HELD BY THIS COURT THAT THE DISMISSAL OF A SPECIAL LEAVE PETITION IN LIMINE BY A NON-SPEAKING ORDER DOES NOT JUSTIFY ANY INFERENCE THAT, BY NECESSARY IMPLICATION, THE CONTENTIONS RAISED IN TH E SPECIAL LEAVE PETITION ON THE MERITS OF THE CASE HAVE BEEN REJECTED BY THE SUPREME COURT . IT HAS BEEN FURTHER HELD THAT THE EFFECT OF A NON-SPEAKING ORDER OF DISMISSAL OF A SP ECIAL LEAVE PETITION WITHOUT ANYTHING MORE INDICATING THE GROUNDS OR REASONS OF ITS DISMI SSAL MUST, BY NECESSARY IMPLICATION, BE TAKEN TO BE THAT THE SUPREME COURT HAD DECIDED O NLY THAT IT WAS NOT A FIT CASE WHERE SPECIAL LEAVE SHOULD BE GRANTED. IN UNION OF INDIA V. ALL INDIA SERVICES PENSIONERS ASSOCIATION [1988] 2 SCC 580; AIR 1988 HON'BLE SUPR EME COURT 501, THIS COURT HAS GIVEN REASONS FOR DISMISSING THE SPECIAL LEAVE PETI TION. WHEN SUCH REASONS ARE GIVEN, THE DECISION BECOMES ONE WHICH ATTRACTS ARTICLE 141 OF THE CONSTITUTION WHICH PROVIDES THAT THE LAW DECLARED BY THE SUPREME COURT SHALL BE BINDING ON ALL THE COURTS WITHIN THE TERRITORY OF INDIA. IT, THEREFORE, FOLLOWS THAT WHE N NO REASON IS GIVEN, BUT A SPECIAL LEAVE PETITION IS DISMISSED SIMPLICITER, IT CANNOT BE SAI D THAT THERE HAS BEEN A DECLARATION OF LAW BY THIS COURT UNDER ARTICLE 141 OF THE CONSTITU TION. IT WAS, THEREFORE, CONTENDED THAT ONCE THIS COURT I N CIVIL APPEAL NO. 424 OF 1999, HAS DISMISSED THE APPEAL IT HAS UPHELD THE ORDER OF THE HIGH COURT IN THE CASE OF THE ASSESSMENT YEAR 1980-81 AND IT CANNOT TAKE A DIFFER ENT VIEW FOR THE ASSESSMENT YEAR 1979-80. THERE APPEARS TO BE SUBSTANCE IN THE SUBMI SSION OF THE ASSESSEE. FROM ABOVE IT BECOMES CLEAR THAT AFTER AN SLP IS DI SMISSED IN LIMINE OR SIMPLICTOR AS SUCH THEN IT CANNOT BE SAID THAT THE HON'BLE SUPREME COURT HAS COMMENTED ON THE MERITS OF THE ISSUE. IT IS A SIMPLE CASE OF REJECTION OF PRAYER FOR ENTERTAINING THE SLP. THE SAME VIEW WAS TAKEN BY THE HON'BLE SUPREME COURT AGAIN IN CASE OF KUNH AYAMMED AND OTHERS V STATE OF KERALA AND ANOTHER, 245 ITR 360 (S.C). HEAD NOTE READS AS UNDER: ARTICLE 136 OF THE CONSTITUTION OF INDIA CONFERS A SPECIAL JURISDICTION ON THE SUPREME COURT WHICH IS SWEEPING IN NATURE. IT IS A RESIDUAR Y POWER IN THE SENSE THAT IT CONFERS AN APPELLATE JURISDICTION ON THE SUPREME COURT SUBJECT TO SPECIAL LEAVE BEING GRANTED IN SUCH MATTERS AS MAY NOT BE COVERED BY THE PRECEDING ARTICLES. EVEN IN THE FIELD COVERED BY THE PRECEDING ARTICLES, JURISDICTION CONFERRED B Y ARTICLE 136 IS AVAILABLE TO BE EXERCISED IN AN APPROPRIATE CASE. IT IS AN UNTRAMME LED RESERVOIR OF POWER INCAPABLE OF BEING CONFINED TO DEFINITIONAL BOUNDS; THE DISCRETI ON CONFERRED ON THE SUPREME COURT BEING SUBJECTED TO ONLY ONE LIMITATION, THAT IS, TH E WISDOM AND GOOD SENSE OR SENSE OF JUSTICE OF THE JUDGES. NO RIGHT OF APPEAL IS CONFER RED UPON ANY PARTY; ONLY A DISCRETION 21 IS VESTED IN THE SUPREME COURT TO INTERFERE BY GRAN TING LEAVE TO AN APPLICANT TO ENTER IN ITS APPELLATE JURISDICTION NOT OPEN OTHERWISE AND A S OF RIGHT. THE JURISDICTION CONFERRED BY ARTICLE 136 IS DIVISI BLE INTO TWO STAGES; THE FIRST STAGE IS UP TO THE DISPOSAL OF THE PRAYER FOR SPECIAL LEAVE TO APPEAL; THE SECOND STAGE COMMENCES IF AND WHEN THE LEAVE TO APPEAL IS GRANTED AND THE PET ITION FOR SPECIAL LEAVE TO APPEAL IS CONVERTED INTO AN APPEAL. WHILE HEARING THE PETITION FOR SPECIAL LEAVE TO APP EAL, THE SUPREME COURT IS CALLED UPON TO SEE WHETHER THE PETITIONER SHOULD BE GRANTED SUC H LEAVE OR NOT. WHILE HEARING SUCH PETITION THE SUPREME COURT DOES NOT EXERCISE ITS AP PELLATE JURISDICTION; IT MERELY EXERCISES ITS DISCRETIONARY JURISDICTION TO GRANT O R NOT TO GRANT LEAVE TO APPEAL IF THE PETITION SEEKING GRANT OF SPECIAL LEAVE IS D ISMISSED, IT IS AN EXPRESSION OF OPINION BY THE SUPREME COURT THAT A CASE FOR INVOKING THE A PPELLATE JURISDICTION OF THE COURT WAS NOT MADE OUT. AN ORDER REFUSING SPECIAL LEAVE TO APPEAL MAY BE BY A NON SPEAKING ORDER OR BY A SPEAKING ORDER. IN EITHER CASE IT DOES NOT ATTRACT THE DOCTRINE OF MERGER. AN ORDER REFUSING SPECIAL LEAVE TO APPEAL DOES NOT STAND SUB STITUTED IN THE PLACE OF THE ORDER UNDER CHALLENGE. ALL THAT IT MEANS IS THAT THE SUPR EME COURT WAS NOT INCLINED TO EXERCISE ITS DISCRETION SO AS TO ALLOW THE APPEAL B EING FILED. WHATEVER BE THE PHRASEOLOGY EMPLOYED IN THE ORDER OF DISMISSAL, IF IT IS A NON-SPEAKING ORDER, I.E., IT DOES NOT ASSIGN REASONS FOR DISMISSING THE SPECIAL LEAVE PETITION, IT WOULD NEITHER ATTRACT THE DOCTRINE OF MERGER SO AS TO STAND SUBSTITUTED I N THE PLACE OF THE ORDER PUT IN ISSUE BEFORE IT, NOR BE A DECLARATION OF LAW BY THE SUPRE ME COURT UNDER ARTICLE 141 OF THE CONSTITUTION FOR THERE IS NO LAW WHICH HAS BEEN DEC LARED. IF THE ORDER REFUSING SPECIAL LEAVE TO APPEAL IS A SPEAKING ORDER, I.E., IT GIVES REASONS FOR REFUSING THE GRANT OF LEAVE, THEN THE ORDER HAS TWO IMPLICATIONS. FIRSTLY, THE STATEMENT OF LAW CONTAINED IN THE ORDER IS A DECLARATION OF LAW BY THE SUPREME COURT WITHIN THE MEANING OF ARTICLE 141 WHICH WILL OBVIOUSLY BE BIND ING ON ALL COURTS AND TRIBUNALS IN INDIA AND CERTAINLY THE PARTIES THERETO. SECONDLY, OTHER THAN THE DECLARATION OF LAW, WHATEVER IS STATED IN THE ORDER ARE THE FINDINGS RE CORDED BY THE SUPREME COURT WHICH WOULD BE BINDING ON THE PARTIES AND THE COURT, TRIB UNAL OR AUTHORITY WHOSE ORDER WAS UNDER CHALLENGE, IN ANY PROCEEDINGS SUBSEQUENT THER ETO, ON THE PRINCIPLE OF JUDICIAL DISCIPLINE, THE SUPREME COURT BEING THE APEX COURT OF THE COUNTRY. THE DECLARATION OF LAW WILL BE GOVERNED BY ARTICLE 141 BUT, THE CASE N OT BEING ONE WHERE LEAVE IS GRANTED, THE DOCTRINE OF MERGER DOS NOT APPLY. FROM ABOVE IT BECOMES CLEAR THAT IF AN SLP IS DISMI SSED THEN IT CANNOT BE SAID THAT THE HON'BLE SUPREME COURT HAS LAID DO WN ANY LAW. NOW IN THE PRESENT CASE THE SLP IN CASE OF CIT V VECTOR SH IPPING SERVICES (SUPRA) FOLLOWING ORDER HAS BEEN PASSED BY THE HON' BLE SUPREME COURT : HEARD MR. MUKUL ROHTAGI, LD. ATTORNEY GENERAL, FOR THE PETITIONER DELAY IN FILING AND REFILLING SPECIAL LEAVE PETITIO N IS CONDONED SPECIAL LEAVE PETITION IS DISMISSED THEREFORE IT IS A CASE OF SIMPLE DISMISSAL OF SLP A ND CANNOT BE SAID TO HAVE LAID DOWN ANY LAW. IN VIEW OF THIS DISCUSSION AND THE EARLIER DISCUSSION WE HAVE PREFERRED TO FOLLOW THE DECISION OF HON'BLE GUJARAT HIGH COURT IN CASE OF CIT V. SIKANDARKHAN N. TUNVAR & ORS, (SUPRA) INSTEAD THE DECISION OF HON'BLE ALLAHABAD HIGH COUR T IN CASE OF CIT V VECTOR SHIPPING SERVICES (SUPRA), WE DECIDE THIS IS SUE AGAINST THE ASSESSEE AND CONFIRM THE ORDER OF LD. CIT(A). 22 24. THE ISSUE BEFORE US IS IDENTICAL TO THE ISSUE B EFORE THE TRIBUNAL IN THE CASE OF SISTER CONCERN WHICH APPEALS WERE ALSO HEARD ALONGWITH THE PRESENT APPEALS AND FOLLOWING THE PARITY OF REASONI NG, WE UPHOLD THE ORDER OF CIT (APPEALS) AND DISALLOW SUM OF RS.27,33 ,461/- BY APPLYING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. T HE GROUND OF APPEAL NO.5 RAISED BY THE ASSESSEE IS THUS DISMISSED. 25. THE ISSUE IN GROUND NO.6 RAISED BY THE ASSESSEE IS IN RELATION TO TREATMENT OF DEFERRED TAX AMOUNTING TO RS.1.71 CROR ES AS BOOK PROFIT FOR THE PURPOSE OF CALCULATION OF MAT UNDER SECTION 115 JB OF THE ACT. 26. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY ADMITT ED THAT THE SAID ISSUE IS AGAINST THE ASSESSEE IN VIEW OF THE AMENDM ENT BY THE FINANCE ACT, 2008 WITH RETROSPECTIVE EFFECT FROM 2001. 27. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE ORDERS OF THE AUTHORITIES BELOW. 28. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD C OMPUTED BOOK PROFITS UNDER SECTION 115JB OF THE ACT WHILE COMPUTING THE INCOME FOR THE YEAR UNDER CONSIDERATION AND HAD EXCLUDED DEFERRED TAX P ROVIDED AND WORKED OUT THE BOOK PROFITS. THE ASSESSING OFFICER NOTED THE SAID RE-WORKING OF BOOK PROFITS OF THE ASSESSEE AND OBSERVED THAT T HE AMOUNT OF DEFERRED TAX COULD BE REDUCED FROM THE BOOK PROFITS UNDER SE CTION 115JB OF THE ACT ONLY IF THE PROVISIONS OF DEFERRED TAX HAD BEEN CREDITED TO THE PROFIT & LOSS ACCOUNT. AS THE ASSESSEE HAD FAILED TO CRE DIT THE SAID PROVISION OF DEFERRED TAX TO THE PROFIT & LOSS ACCOUNT, THE A SSESSING OFFICER HELD THAT THE DEFERRED TAX AMOUNTING TO RS.1.71 CRORES C OULD NOT BE EXCLUDED FOR THE PURPOSE OF CALCULATION OF MAT UNDER SECTION 115JB OF THE ACT AND THE BOOK PROFITS WERE RE-WORKED. 23 29. THE CIT (APPEALS) UPHELD THE ORDER OF THE ASSES SING OFFICER. 30. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE LEARNED A.R. FOR THE ASSESSEE IN THE FIRST INSTANCE WAS AGREED THAT THE ISSUE IS SETTLED AGAINST THE ASSESSEE IN VIEW OF TH E AMENDMENT OF THE PROVISIONS OF SECTION 115JB OF THE ACT. WE FIND THAT THE FINANCE ACT, 2008 HAD MADE CERTAIN INSERTIONS UNDER SECTION 115J B OF THE ACT WHICH WERE APPLICABLE WITH RETROSPECTIVE EFFECT FROM 1.4. 2001. THE SAID INSERTIONS WERE MADE TO THE EXPLANATION-I, WHICH DE FINED BOOK PROFITS. IN THE FIRST PORTION OF THE EXPLANATION-I, IT IS PR OVIDED THAT THE BOOK PROFITS MEANS THE NET PROFITS AS SHOWN IN THE PROFI T & LOSS ACCOUNT FOR THE RELEVANT YEARS AS INCREASED BY SEVERAL AMOUNTS REFERRED TO IN CLAUSE (A) TO CLAUSE (I) UNDER THE SAID EXPLANATION. THE CLAUSE (H) WHICH WAS INTRODUCED BY THE FINANCE ACT, 2008 WITH RETROSPECT IVE EFFECT FROM 1.4.2001 TALKS OF DEFERRED TAX AND THE PROVISIONS T HEREOF. HENCE, IT IMPLIES THAT WHILE COMPUTING THE BOOK PROFITS, THE AMOUNT OF DEFERRED TAX DEBITED TO THE PROFIT & LOSS ACCOUNT HAS TO BE ADDED TO THE NET PROFITS SHOWN IN THE PROFIT & LOSS ACCOUNT, WHILE C OMPUTING THE BOOK PROFITS FOR MAT PROVISIONS. THE EXPLANATION ITSEL F FURTHER PROVIDES THAT IF ANY AMOUNT REFERRED TO UNDER CLAUSES (A) TO (I) IS DEBITED TO THE PROFIT & LOSS ACCOUNT THEN AS REDUCED BY VARIOUS AM OUNTS REFERRED TO IN CLAUSES (I) TO (VIII), THE BOOKS PROFITS HAVE TO BE DETERMINED. THE CLAUSE (VIII) PROVIDES THE AMOUNT OF DEFERRED TAX, IF ANY, SUCH AMOUNT IS CREDITED TO THE PROFIT & LOSS ACCOUNT. BOTH THE A SSESSING OFFICER AND THE CIT (APPEALS) HAVE GIVEN FINDINGS THAT THE ASSE SSEE HAD NOT CREDITED ANY AMOUNT OF DEFERRED TAX TO THE PROFIT & LOSS ACC OUNT. IN VIEW THEREOF, WHILE COMPUTING THE BOOK PROFITS UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT THE AMOUNT OF DEFERRED TAX AND PRO VISIONS THEREOF, HAD TO BE ADDED BACK TO THE PROFITS SHOWN IN THE PROFIT & LOSS ACCOUNT UNDER 24 THE MAT PROVISIONS. UPHOLDING THE ORDER OF THE CI T (APPEALS) WE DISMISS THE GROUND OF APPEAL NO.6 RAISED BY THE ASS ESSEE. 31. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF AUGUST, 2014. SD/- SD/- T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28 TH AUGUST, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH