DCIT, Tirunelveli V. New Santha stores, Palayamkottai

ITA 3085/CHNY/2014

• Counselvise Citation: 308521714 RSA 2014
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 11-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 19-12-2014
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: S SRIDHAR
• Section: 194C; 15

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.3085/MDS/2014 / ASSESSMENT YEAR : 2009-10 THE DY. COMMISSIONER OF INCOME-TAX CIRCLE-I TIRUNELVELI VS. M/S NEW SANTHA STORES CEMENT STOCKISTS NO.9, MARKET BUILDING TIRUCHENDUR ROAD PALAYAMKOTTAI [PAN AACFN 4870 D] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI A.V.SREEKANTH, JCIT /RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE / DATE OF HEARING : 11 - 08 - 2015 ! / DATE OF PRONOUNCEMENT : 04 - 09 - 2015 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, MADUR AI, DATED 27.8.2014 AND PERTAINS TO ASSESSMENT YEAR 2009-10. 2. SHRI A.V.SREEKANTH, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE IS A DEALER IN CEMENT AND HARDWARE. THE ITA NO. 3085/14 :- 2 -: ASSESSEE IS ALSO ENGAGED IN TRANSPORT OF LIMESTONE FROM QUARRIES OF INDIA CEMENTS LTD. AT IRUKKANTHURAI AND KOODANKULAM TO INDIA CEMENTS LTD.S STORAGE YARD AT SANKARNAGAR. DURING THE COURSE OF ITS BUSINESS, THE ASSESSEE HIRED LORRIES AND PAID HIRE CHARGES. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS TO D EDUCT TAX U/S 194C OF THE ACT FOR PAYMENT OF FREIGHT CHARGES TO THE L ORRY OWNERS. SINCE TAX WAS NOT DEDUCTED U/S 194C OF THE ACT, THE ASSE SSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE TO THE EXTENT OF ` 2,57,09,973/- U/S 40(A)(IA) OF THE ACT . HOWEVER, ON APPEAL BY TH E ASSESSEE, THE CIT(A) FOUND THAT THE ASSESSEE HAS PAID HIRE CHARG ES FOR HIRING THE LORRIES THROUGH BROKERS. THE ASSESSEE EXECUTED TH E WORK BY ITSELF BY HIRING LORRIES AND NO PART OF THE WORK WAS GIVEN TO ANY SUB-CONTRACTOR. THEREFORE, THE CIT(A) FOUND THAT 194C OF THE ACT IS NOT APPLICABLE TO THE ASSESSEES CASE. REFERRING TO APPLICATION OF 40(A)(IA) OF THE ACT, THE CIT(A) FOUND THAT 40(A)(IA) IS APPLICABLE ONLY IN RESPECT OF THE AMOUNT WHICH REMAINS PAYABLE ON THE LAST DAY OF T HE FINANCIAL YEAR. SINCE THE ASSESSEE HAS ALREADY PAID THE AMOUNTS , THE CIT(A) FOUND THAT SEC. 40(A)(IA) OF THE ACT IS NOT APPLICABLE. THE CIT(A) PLACED HIS RELIANCE ON THE DECISION OF THE HYDERABAD BENCH OF THIS TRIBUNAL IN TEJA CONSTRUCTIONS VS ACIT, 39 SOT 13 AND THE DECIS ION OF THIS TRIBUNAL IN ITO VS THEEKATHIR PRESS. ACCORDING TO THE LD. DR, THE ASSESSEE IS LIABLE TO DEDUCT TAX 40(A)(IA) OF THE A CT. MOREOVER, THE ITA NO. 3085/14 :- 3 -: ASSESSEE IS EXPECTED TO DEDUCT TAX AT THE TIME OF M AKING PAYMENT OR GIVING CREDIT TO THE RECIPIENTS ACCOUNT, THEREFOR E, PLACING RELIANCE ON THE DECISION OF THE HYDERABAD BENCH OF THIS TRIBUNA L IN TEJA CONSTRUCTIONS IS MISCONSTRUED. 3. ON THE CONTRARY, SHRI S. SRIDHAR, LD. COUNSEL FOR T HE ASSESSEE SUBMITTED THAT THE ASSESSEE HIRED THE LORRIES AND PAID FREIGHT CHARGES. NO PART OF THE WORK WAS GIVEN TO ANY CONTRACTOR. TH EREFORE, IT IS NOT A CASE OF PAYMENT FOR WORKS CONTRACT. ACCORDING TO T HE LD. COUNSEL, IT IS ONLY HIRING OF THE LORRIES AND PAYMENT OF HIRE CHAR GES, THEREFORE, THE CIT(A) HAS RIGHTLY FOUND THAT SEC.194C OF THE ACT I S NOT APPLICABLE. ON A QUERY FROM THE BENCH WHY SEC. 194I OF THE ACT IS NOT APPLICABLE, THE LD. COUNSEL SUBMITTED THAT IT IS NOT THE CASE OF TH E REVENUE THAT TAX HAS TO BE DEDUCTED U/S 194I OF THE ACT. THE SPECI FIC CONTENTION OF THE REVENUE IS THAT TAX HAS TO BE DEDUCTED U/S 194C OF THE ACT. REFERRING TO SEC. 40(A)(IA) OF THE ACT, THE LD. COUNSEL SUBMI TTED THAT PROVISION OF THIS SECTION IS APPLICABLE ONLY IN RESPECT OF THE A MOUNT WHICH REMAINS PAYABLE AS ON THE LAST DAY OF THE FINANCIAL YEAR. SINCE, ADMITTEDLY, THE ASSESSEE HAS MADE THE PAYMENT, NO DISALLOWANCE COULD BE MADE U/S 40(A)(IA) OF THE ACT. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. LET US FIRST CONSIDER ITA NO. 3085/14 :- 4 -: WHETHER TAX HAS TO BE DEDUCTED IN RESPECT OF THE AM OUNT WHICH REMAINS PAYABLE ON THE LAST DAY OF THE FINANCIAL YEAR OR IT HAS TO BE DEDUCTED AT THE TIME OF PAYMENT OR GIVING CREDIT. NO DOUBT, THE HYDERABAD BENCH OF THIS TRIBUNAL IN TEJA CONSTRUCTI ONS(SUPRA) FOUND THAT TAX NEED NOT BE DEDUCTED ON THE AMOUNT WHICH W AS ALREADY PAID AND TAX HAS TO BE DEDUCTED ONLY ON THE AMOUNT WHICH REMAINS PAYABLE. THE HYDERABAD BENCH WHILE INTERPRETING THE WORD PAYABLE IN SEC. 40(A)(IA) OF THE ACT FOUND THAT THE TAX HAS TO BE DEDUCTED ONLY ON THE AMOUNT WHICH REMAINS PAYABLE ON THE LAST D AY OF THE FINANCIAL YEAR. IN FACT, THIS VIEW OF THE HYDERABAD BENCH OF THIS TRIBUNAL WAS CONFIRMED BY A SPECIAL BENCH DECISION IN MERIYLIN S HIPPING & TRANSPORTS VS ADDL. CIT, 20 TAXMANN.COM 244, BY MAJ ORITY VIEW. THIS TRIBUNAL FOUND THAT THE COCHIN BENCH OF THIS TRIBUN AL HAD AN OCCASION TO CONSIDER AN IDENTICAL SITUATION IN SHRI THOMAS G EORGE MUTHOOT VS ACIT IN I.T.A.NOS. 63 & 64/COCH/2014 DATED 28.8.201 4. AFTER CONSIDERING THE JUDGMENT OF THE CALCUTTA HIGH COURT IN CRESCENT EXPORTS SYNDICATE & ANOTHER AND GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR, IT WAS FOUND THAT TAX HAS TO BE DEDUCTED AT THE TIME OF MAKING PAYMENT OR GIVING CREDIT. THEREFORE, IT MAY NOT BE CORRECT TO SAY THAT TAX HAS TO BE DEDUCTED ONLY ON THE AMOUNT WHICH REM AINS PAYABLE ON THE LAST DAY OF THE FINANCIAL YEAR. IN FACT, THE C OCHIN BENCH OF THIS TRIBUNAL HAS OBSERVED AS FOLLOWS: ITA NO. 3085/14 :- 5 -: 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 AMOUNT WHICH REMA INS TO BE PAYABLE ON THE LAST DAY OF THE FINANCIAL YEAR. THE LD.REPRESENTATIVE PLACED HIS RELIANCE ON THE DECISI ON OF THE SPECIAL BENCH OF THIS TRIBUNAL IN MERILYN SHIPPING & 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 JUDGMENT DATED 09-07-2013 AND SUBMITTED THAT THE SLP FILED BY THE REVENUE IN THE APEX COURT AGAINST THE JUDGMENT OF TH E ALLAHABAD HIGH COURT IN M/S VECTOR SHIPPING SERVICE S (P) LTD (SUPRA) IS DISMISSED BY THE APEX COURT. IT IS WELL S ETTLED 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 I S ALSO EQUALLY SETTLED PRINCIPLE THAT A DISMISSAL OF SLP W ITHOUT ANY DISCUSSION IS NOT THE LAW DECLARED BY THE APEX COURT . THE APEX COURT THOUGHT IT FIT THAT IT WAS NOT A FIT CASE TO BE ADMITTED FOR CONSIDERATION. THEREFORE, WHILE DISMIS SING THE SLP, THE APEX COURT DID NOT DECLARE ANY LAW. HENCE, WE CANNOT SAY THAT THE APEX COURT HAS DECLARED THE LAW DECLARI NG THAT SECTION 40(A)(IA) IS APPLICABLE ONLY IN RESPECT OF TH E AMOUNTS REMAINS TO BE PAYABLE AT THE LAST DAY OF THE FINANC IAL YEAR. 12. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMENT OF THE ALLAHABAD HIGH COURT IN CIT VS M/S VECTOR SHIPPING SERVICES (P) LTD (SUPRA), COPY OF WHICH IS FILED BY THE ASSE SSEE. THE ALLAHABAD HIGH COURT, AFTER REPRODUCING THE RELEVAN T PARAGRAPH FROM THE ORDER OF CIT(A) AND REFERRING TO THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN ME RILYIN 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 SHI PPING & TRANSPORTS (SUPRA). HOWEVER, WE FIND THAT THE GUJAR AT 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 ITA NO. 3085/14 :- 6 -: CONSIDERED THE DECISION OF THE SPECIAL BENCH OF THIS 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 EXP ORTS SYNDICATE & ANOTHER IN ITAT 20 OF 2013 AND GA 190 OF 2013 JUDGMENT DATED 03-04-2013 CONSIDERED ELABORATELY THE JUDGMENT OF THE SPECIAL BENCH OF THIS TRIBUNAL IN ME RILYN SHIPPING & TRANSPORTS (SUPRA) AND FOUND THAT THE DE CISION RENDERED BY THE SPECIAL BENCH OF THIS TRIBUNAL IS NO T THE CORRECT LAW. IT IS WELL SETTLED PRINCIPLES OF LAW T HAT WHEN DIFFERENT HIGH COURTS EXPRESSED DIFFERENT OPINIONS O N A POINT OF LAW, THEN, NORMALLY, THE BENEFIT OF DOUBT UNDER THE TAXATION LAW WOULD GO TO THE ASSESSEE. IT IS ALSO EQUALLY SE TTLED 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 HAS N O REASONING AND DISCUSSION. ADMITTEDLY, THE CALCUTTA HIGH COURT AND GUJARAT HIGH COURT HAVE DISCUSSED THE ISSUE ELA BORATELY AND THE SPECIFIC REASONING HAS ALSO BEEN RECORDED A S TO WHY THE SPECIAL BENCH IS NOT CORRECT. THEREFORE, THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT THE JUDGMENTS OF THE CA LCUTTA HIGH COURT CRESCENT EXPORTS SYNDICATE & ANOTHER (SUP RA) AND GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR (SUPRA) HAVE TO BE PREFERRED WHEN COMPARED TO THE ALLAHABAD HIGH CO URT IN M/S VECTOR SHIPPING SERVICES (P) LTD (SUPRA). 13. FOR THE PURPOSE OF CONVENIENCE WE REPRODUCING BE LOW THE OBSERVATIONS MADE BY THE CALCUTTA HIGH COURT IN CRE SCENT EXPORTS SYNDICATE & ANOTHER (SUPRA) AND GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR (SUPRA): CALCUTTA HIGH COURT IN CRESCENT EXPORTS SYNDICATE & ANOTHER (SUPRA) BEFORE DEALING WITH THE SUBMISSIONS OF THE LEARNED COUNSEL APPEARING FOR THE ASSESSEES IN BOTH THE APPEALS WE HAVE TO EXAMINE THE CORRECTNESS OF THE MAJORITY VIEWS IN THE CASE OF MERILYN SHIPPING. ITA NO. 3085/14 :- 7 -: WE ALREADY HAVE QUOTED EXTENSIVELY BOTH THE MAJ ORITY AND THE MINORITY VIEWS EXPRESSED IN THE AFORESAID CA SE. THE MAIN THRUST OF THE MAJORITY VIEW IS BASED ON THE FA CT THAT THE LEGISLATURE HAS REPLACED THE EXPRESSION AMOUNTS CREDITED OR PAID WITH THE EXPRESSION PAYABLE IN T HE FINAL ENACTMENT. COMPARISON BETWEEN THE PRE-AMENDMENT AND POST AMENDMENT LAW IS PERMISSIBLE FOR THE PURPOSE OF ASCERTAINING THE MISCHIEF SOUGHT TO BE REMEDIED OR THE OBJECT SOUGHT TO BE ACHIEVED BY AN AMENDMENT. THIS IS PRECISELY WHAT WAS DONE BY THE APEX COURT IN THE CAS E OF CIT VS. KELVINATOR REPORTED IN 2010(2) SCC 723. BUT THE SAME COMPARISON BETWEEN THE DRAFT AND THE ENACTED L AW IS NOT PERMISSIBLE. NOR CAN THE DRAFT OR THE BILL BE U SED FOR THE PURPOSE OF REGULATING THE MEANING AND PURPORT O F THE ENACTED LAW. IT IS THE FINALLY ENACTED LAW WHICH IS THE WILL OF THE LEGISLATURE. THE LEARNED TRIBUNAL FELL INTO AN ERROR IN NO T REALIZING THIS ASPECT OF THE MATTER. THE LEARNED TRIBUNAL HELD THAT WHERE LANGUAGE IS C LEAR THE INTENTION OF THE LEGISLATURE IS TO BE GATHERED FROM THE LANGUAGE USED. HAVING HELD SO, IT WAS NOT OPEN TO SEEK TO INTERPRET THE SECTION ON THE BASIS OF ANY COMPARISO N BETWEEN THE DRAFT AND THE SECTION ACTUALLY ENACTED NOR WAS IT OPEN TO SPECULATE AS TO THE EFFECT OF THE SO-CAL LED REPRESENTATIONS MADE BY THE PROFESSIONAL BODIES. THE LEARNED TRIBUNAL HELD THAT SECTION 40(A)(IA) OF THE ACT CREATES A LEGAL FICTION BY VIRTUE OF WHICH EVEN THE GENUINE AND ADMISSIBLE EXPENSES CLAIMED BY AN ASSESS EE UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION : IF THE ASSESSEE DOES NOT DEDUCT TDS ON SUCH EXPENSES AR E DISALLOWED. HAVING HELD SO WAS IT OPEN TO THE TRIBUNAL TO SEEK TO JUSTIFY THAT THIS FICTION CANNOT BE EXTENDED ANY FU RTHER AND, THEREFORE, CANNOT BE INVOKED BY ASSESSING OFFI CER TO DISALLOW THE GENUINE AND REASONABLE EXPENDITURE ON T HE ITA NO. 3085/14 :- 8 -: AMOUNTS OF EXPENDITURE ALREADY PAID? DOES THIS NOT AMOUNT TO DELIBERATELY READING SOMETHING IN THE LAW WHICH IS NOT THERE? WE, AS SUCH, HAVE NO DOUBT IN OUR MIND THAT THE LEA RNED TRIBUNAL REALIZED THE MEANING AND PURPORT OF SECTIO N 40(A)(IA) CORRECTLY WHEN IT HELD THAT IN CASE OF OMIS SION TO DEDUCT TAX EVEN THE GENUINE AND ADMISSIBLE EXPENSES A RE TO BE DISALLOWED. BUT THEY SOUGHT TO REMOVE THE RIGOUR OF THE LAW BY HOLDING THAT THE DISALLOWANCE SHALL BE RESTR ICTED TO THE MONEY WHICH IS YET TO BE PAID. WHAT THE TRIBUNA L BY MAJORITY DID WAS TO SUPPLY THE CASUS OMISSUS WHICH WAS NOT PERMISSIBLE AND COULD ONLY HAVE BEEN DONE BY THE SU PREME COURT IN AN APPROPRIATE CASE. REFERENCE IN THIS REG ARD MAY BE MADE TO THE JUDGMENT IN THE CASE OF BHUWALKA STEE L INDUSTRIES VS. BOMBAY IRON & STEEL LABOUR BOARD REPOR TED IN 2010(2) SCC 273. UNPROTECTED WORKER WAS FINALLY DEFINED IN SECTION 2(11) OF THE MATHADI ACT AS FOLLOWS:- UNPROTECTED WORKER MEANS A MANUAL WORKER WHO IS ENGAGED OR TO BE ENGAGED IN ANY SCHEDULED EMPLOYMEN T. THE CONTENTION RAISED WITH REFERENCE TO WHAT WAS TH ERE 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 THE PROVISIONS OF THIS ACT IS NOT ADEQUATELY PROTECTED BY LEGISLATION FOR WELFARE AND BENEFITS OF THE LABOUR FORCE IN THE STATE, THESE PRECISE WORDS WERE REMOVED BY THE LEGISLATURE AND THE DEFINITION WAS MADE LIMITED AS IT HAS BEEN FINALLY LEGISLATED UPON. IT IS TO BE NOTED THA T WHEN THE BILL CAME TO BE PASSED AND RECEIVED THE ASSENT OF TH E VICE- PRESIDENT ON 05-06-1969 AND WAS FIRST PUBLISHED IN THE MAHARASHTRA GOVERNMENT GAZETTE EXTRAORDINARY, PART I V ON 13-06-1969, THE AFOREMENTIONED WORDS WERE OMITTED. THEREFORE, T HIS WOULD BE A CLEAR POINTER TO THE LE GISLATIVE INTENT THAT THE LEGISLATURE BEING CONSCIOUS OF THE FACT AND ITA NO. 3085/14 :- 9 -: BEING ARMED WITH ALL THE COMMITTEE REPORTS AND ALSO BEING ARMED WITH THE FACTUAL DATA, DELIBERATELY AVOIDED T HOSE WORDS. WHAT THE APPELLANTS ARE ASKING WAS TO READ I N THAT DEFINITION, THESE PRECISE WORDS, WHICH WERE CONSCIO USLY AND DELIBERATELY OMITTED FROM THE DEFINITION. THAT WOUL D AMOUNT TO SUPPLYING THE CASUS OMISSUS AND WE DO NOT THINK THAT IT IS POSSIBLE, PARTICULARLY, IN THIS CASE. THE LAW OF SU PPLYING THE CASUS OMISSUS BY THE COURTS IS EXTREMELY CLEAR AND S ETTLED THAT THOUGH THIS COURT MAY SUPPLY THE CASUS OMISSUS , IT WOULD BE IN THE RAREST OF THE RATE CASE AND THUS SU PPLYING OF THIS CASUS OMISSUS WOULD BE EXTREMELY NECESSARY DUE TO THE INADVERTENT OMISSION ON THE PART OF THE LEGISLATURE . BUT, THAT IS CERTAINLY NOT THE CASE HERE. WE SHALL NOW ENDEAVOUR TO SHOW THAT NO OTHER INTERPRETATION IS POSSIBLE. THE KEY WORDS USED IN SECTION 40(A)(IA), ACCORDING TO US, ARE ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAP TER XVII-B. IF THE QUESTION IS WHICH EXPENSES ARE SOUGH T TO BE DISALLOWED? THE ANSWER IS BOUND TO BE THOSE EXP ENSES ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER X VII-B. ONCE THIS IS REALIZED NOTHING TURNS ON THE BASIS OF THE FACT THAT THE LEGISLATURE USED THE WORD PAYABLE AND NO T PAID OR CREDITED. UNLESS ANY AMOUNT IS PAYABLE, IT CAN NEI THER BE PAID NOR CREDITED. IF AN AMOUNT HAS NEITHER BEEN PA ID NOR CREDITED, THERE CAN BE NO OCCASION FOR CLAIMING ANY DEDUCTION. THE LANGUAGE USED IN THE DRAFT WAS UNCLEAR AND SUSCEPTIBLE TO GIVING MORE THAN ONE MEANING. BY LOO KING AT THE DRAFT IT COULD BE SAID THAT THE LEGISLATURE WAN TED TO TREAT THE PAYMENTS MADE OR CREDITED IN FAVOUR OF A CONTRACTOR OF SUBCONTRACTOR DIFFERENTLY THAN THE PA YMENTS ON ACCOUNT OF INTEREST, COMMISSION OR BROKERAGE, FE ES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S BECAUSE THE WORDS AMOUNTS CREDITED OR PAID WERE USED ONLY IN RELATION TO A CONTRACTOR OF SUB-CONTRACTOR. THIS DI FFERENTIAL TREATMENT WAS NOT INTENDED. THEREFORE, THE LEGISLAT URE PROVIDED THAT THE AMOUNTS, ON WHICH TAX IS DEDUCTIBL E AT SOURCE UNDER XVII-B PAYABLE ON ACCOUNT OF INTEREST, ITA NO. 3085/14 :- 10 -: 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 LEGISLATUR E IN THE FINALLY ENACTED LAW IS CLEAR AND UNAMBIGUOUS WHEREA S THE LANGUAGE USED IN THE BILL WAS AMBIGUOUS. A FEW WORDS ARE NOW NECESSARY TO DEAL WITH THE SUBMISSION OF MR. BAGCHI AND MS. ROYCHOWDHURI. THERE 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 NOT 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 1ST APRIL, 2013 SHOULD BE HELD TO HAVE ALREADY BECOME OPERATIVE PRIOR TO THE APPOINTED DAT E CANNOT ALSO BE ACCEDED TO FOR THE SAME REASON INDICATED AB OVE. THE LAW WAS DELIBERATELY MADE HARSH TO SECURE COMPLIANC E 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 OP INION THAT THE MAJORITY VIEWS EXPRESSED IN THE CASE OF MER ILYN SHIPPING & TRANSPORTS ARE NOT ACCEPTABLE. THE SUBMI SSIONS ADVANCED BY LEARNED ADVOCATES HAVE ALREADY BEEN DEA LT WITH AND REJECTED. GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR( SUPRA) 23. DESPITE THIS NARROW INTERPRETATION OF SECTION 40(A)(IA), THE QUESTION STILL SURVIVES IF THE TRIBUNA L IN CASE OF M/S MERILYN SHIPPING & TRANSPORS VS. ACIT (SUPRA ) WAS ACCURATE IN ITS OPINION. IN THIS CONTEXT, WE WOULD L IKE TO EXAMINE TWO ASPECTS. FIRSTLY, WHAT WOULD BE THE CORR ECT INTERPRETATION OF THE SAID PROVISION. SECONDLY, WHE THER 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 ADDRE SS ONE ITA NO. 3085/14 :- 11 -: AFTER ANOTHER. IF ONE LOOKS CLOSELY TO THE PROVISIO N, IN QUESTION, ADVERSE CONSEQUENCES OF NOT BEING ABLE TO CLAIM DEDUCTION ON CERTAIN PAYMENTS IRRESPECTIVE OF THE PROVISIONS CONTAINED IN SECTIONS 30 TO 38 OF THE ACT W OULD FLOW IF THE FOLLOWING REQUIREMENTS ARE SATISFIED:- (A) THERE IS INTEREST, COMMISSION OR BROKERAGE, REN T, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR BEING RESIDENT FOR CARRYING OUT ANY WORK. (B) THESE AMOUNTS ARE SUCH ON WHICH TAX IS DEDUCTIBL E AT SOURCE UNDER XVIII-B. (C) SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTIO N HAS NOT BEEN PAID ON OR BEFORE DUE DATE SPECIFIED I N SUB-SECTION (1) OF SECTION 39. FOR THE PURPOSE OF CURRENT DISCUSSION REFERENCE TO THE PROVISO IS NOT NECESSARY. 24. WHAT THIS SUB-SECTION, THEREFORE, REQUIRES IS THA T THERE SHOULD BE AN AMOUNT PAYABLE IN THE NATURE DES CRIBED ABOVE, WHICH IS SUCH ON WHICH TAX IS DEDUCTIBLE AT S OURCE UNDER CHAPTER XVII-B BUT SUCH TAX HAS NOT BEEN DEDUCT ED OR IF DEDUCTED NOT PAID BEFORE THE DUE DATE. THIS P ROVISION NOWHERE REQUIRES THAT THE AMOUNT WHICH IS PAYABLE M UST REMAIN SO PAYABLE THROUGHOUT DURING THE YEAR. TO RE ITERATE THE PROVISION HAS CERTAIN STRICT AND STRINGENT REQU IREMENTS BEFORE THE UNPLEASANT CONSEQUENCES ENVISAGED THEREI N CAN BE APPLIED. WE ARE PREPARED TO AND WE ARE DUTY BOUN D TO INTERPRET SUCH REQUIREMENTS STRICTLY. SUCH REQUIREM ENTS, HOWEVER, CANNOT BE ENLARGED BY ANY ADDITION OR SUBT RACTION OF WORDS NOT USED BY THE LEGISLATURE. THE TERM USED IS INTEREST, COMMISSION, BROKERAGE ETC. IS PAYABLE TO A RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTO R FOR CARRYING OUT ANY WORK. THE LANGUAGE USED IS NOT THA T SUCH AMOUNT MUST CONTINUE TO REMAIN PAYABLE TILL THE END OF THE ACCOUNTING YEAR. ANY SUCH INTERPRETATION WOULD REQU IRE READING WORDS WHICH THE LEGISLATURE HAS NOT USED. N O SUCH INTERPRETATION WOULD EVEN OTHERWISE BE JUSTIFIED BE CAUSE IN OUR OPINION, THE LEGISLATURE COULD NOT HAVE INTENDE D TO BRING ITA NO. 3085/14 :- 12 -: ABOUT ANY SUCH DISTINCTION NOR THE LANGUAGE USED IN THE SECTION BRINGS ABOUT ANY SUCH MEANING. IF THE INTER PRETATION S ADVANCED BY THE ASSESSEES IS ACCEPTED, IT WOULD L EAD TO A SITUATION WHERE THE ASSESSEE THOUGH WAS REQUIRED TO DEDUCT THE TAX AT SOURCE BUT NO SUCH DEDUCTION WAS MADE OR MORE FLAGRANTLY DEDUCTION THOUGH MADE IS NOT PAID TO THE GOVERNMENT, WOULD ESCAPE THE CONSEQUENCE ONLY BECAU SE THE AMOUNT WAS ALREADY PAID OVER BEFORE THE END OF THE YEAR IN CONTRAST TO ANOTHER ASSESSEE WHO WOULD OTHERWISE BE IN SIMILAR SITUATION BUT IN WHOSE CASE THE AMOUNT REMA INED PAYABLE TILL THE END OF THE YEAR. WE SIMPLY DO NOT SEE ANY LOGIC WHY THE LEGISLATURE WOULD HAVE DESIRED TO BRI NG ABOUT SUCH IRRECONCILABLE AND DIVERSE CONSEQUENCES. WE HA STEN TO ADD THAT THIS IS NOT THE PRIME BASIS ON WHICH WE HA VE ADOPTED THE INTERPRETATION WHICH WE HAVE GIVEN. IF THE LANGUAGE USED BY THE PARLIAMENT CONVEYED SUCH A MEA NING, WE WOULD NOT HAVE HESITATED IN ADOPTING SUCH AN INTERPRETATION. WE ONLY HIGHLIGHT THAT WE WOULD NOT READILY ACCEPT THAT THE LEGISLATURE DESIRED TO BRING ABOUT AN INCONGRUOUS AND SEEMINGLY IRRECONCILABLE CONSEQUENC ES. THE DECISION OF THE SUPREME COURT IN THE CASE OF COMMIS SIONER OF INCOME-TAX, GUJARAT VS. ASHOKBHAI CHIMANBHAI (SUP RA), 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 CERTAIN PERIOD I.E. THE ACCOUNTING YEAR. IN THIS CONTEXT, LA ST DATE OF SUCH ACCOUNTING PERIOD WOULD ASSUME CONSIDERABLE SIGNIFICANCE. HOWEVER, THIS DECISION NOWHERE INDICA TES THAT THE EVENTS WHICH TAKE PLACE DURING THE ACCOUNTING P ERIOD SHOULD BE IGNORED AND THE ASCERTAINMENT OF FULFILLI NG A CERTAIN CONDITION PROVIDED UNDER THE STATUTE MUST B E JUDGED WITH REFERENCE TO LAST DATE OF THE ACCOUNTIN G PERIOD. PARTICULARLY, IN THE CONTEXT OF REQUIREMENTS F SECTI ON 40(A)(IA) OF THE ACT, WE SEE NO WARRANT IN THE SAID D ECISION OF THE SUPREME COURT TO APPLY THE TEST OF PAYABILIT Y ONLY AS ON 31ST MARCH OF THE YEAR UNDER CONSIDERATION. MEREL Y BECAUSE, ACCOUNTS ARE CLOSED ON THAT DATE AND THE COMPUTATION OF PROFIT AND LOSS IS TO BE JUDGED WITH REFERENCE TO SUCH DATE, DOES NOT MEAN THAT WHETHER AN AMOUNT IS PAYABLE OR NOT MUST BE ASCERTAINED ON THE STRENGTH OF THE POSITION EMERGING ON 31T MARCH. ITA NO. 3085/14 :- 13 -: 25. THIS BRINGS US TO THE SECOND ASPECT OF THIS DISCU SSION, 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 ARG UMENT OF THE TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) TO ADOPT A PARTICULAR V IEW. 26. WHILE INTERPRETING A STATUTORY PROVISION THE COUR TS HAVE OFTEN APPLIED HYDENS RULE OR THE MISCHIEF RULE AND ASCERTAINED WHAT WAS THE POSITION BEFORE THE AMENDM ENT, WHAT THE AMENDMENT SOUGHT TO REMEDY AND WHAT WAS TH E EFFECT OF THE CHANGES. 27 TO 36.. 37. IN OUR OPINION, THE TRIBUNAL COMMITTED AN ERROR I N APPLYING THE PRINCIPLE OF CONSCIOUS OMISSION IN THE PRESENT CASE. FIRSTLY, AS ALREADY OBSERVED, WE HAVE SERIOUS DOUBT WHETHER SUCH PRINCIPLE CAN BE APPLIED BY COMPARING THE DRAFT PRESENTED IN PARLIAMENT AND ULTIMATE LEGISLAT ION WHICH MAY BE PASSED. SECONDLY, THE STATUTORY PROVISIONS I S AMPLY CLEAR. 38. IN THE RESULT, W ARE OF THE OPINION THAT SECTION 40(A)(IA) WOULD COVER NOT ONLY TO THE AMOUNTS WHICH ARE PAYAB LE AS ON 20 ITA NO. 63&64M 83-85&7-72/COCH/2014 31ST MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. OF COURSE, AS LONG AS THE OTHER RE QUIREMENT OF THE SAID PROVISION EXIST. IN THAT CONTEXT, IN OUR OPINION THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPING & TRANSPORTS VS ACIT ( SUPRA), DOES NOT LAY DOWN CORRECT LAW. 14. BY FOLLOWING THE JUDGMENTS OF THE CALCUTTA HIGH COURT IN CRESCENT EXPORT SYNDICATE (SUPRA) AND THE GUJARAT HI GH COURT IN SIKANDARKHAN N TUNVAR (SUPRA), THIS TRIBUN AL IS OF THE CONSIDERED OPINION THAT THE DECISION OF THE SPE CIAL BENCH OF THIS TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPIN G & TRANSPORTS (SUPRA) AND THE JUDGMENT OF THE ALLAHABA D HIGH ITA NO. 3085/14 :- 14 -: COURT IN VECTOR SHIPPING SERVICES (P) LTD (SUPRA) A RE NOT APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERA TION WHEREAS THE JUDGMENTS OF THE CALCUTTA HIGH COURT IN CRESCENT EXPORT SYNDICATE (SUPRA) AND THE GUJARAT HI GH COURT IN SIKANDARKHAN N TUNVAR (SUPRA) ARE SQUARELY APPLICABLE TO THE FACTS OF THE CASE. RESPECTFULLY F OLLOWING THE JUDGMENTS OF THE CALCUTTA HIGH COURT IN CRESCENT EXP ORT SYNDICATE (SUPRA) AND THE GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR (SUPRA), WE DO NOT SEE ANY IN FIRMITY IN THE ORDERS OF THE LOWER AUTHORITIES. ACCORDINGLY, T HE ORDERS OF THE LOWER AUTHORITIES ARE CONFIRMED. 5. IN FACT, THE ASSESSEE CARRIED THE MATTER BEFORE TH E KERALA HIGH COURT IN SHRI THOMAS GEORGE MUTHOOT VS CIT IN I.T.A.NO.278 OF 2014. THE KERALA HIGH COURT BY JUDGMENT DATED 3.7. 2015, CONFIRMED THE ORDER OF THE TRIBUNAL BY PLACING RELIANCE ON TH E JUDGMENTS OF THE CALCUTTA AND GUJARAT HIGH COURTS. IN FACT, THE KER ALA HIGH COURT OBSERVED AS FOLLOWS IN PARA 17 OF ITS JUDGMENT: 17.ANOTHER CONTENTION THAT WAS PRESSED INTO SERVICE WAS THAT THE APPELLANTS HAD ALREADY PAID THE AMOUNT AND THEREFORE, THE PROVISIONS OF SECTION 40(A)(IA), APPLICABLE ONLY IN RESPECT OF THE AMOUNT WHICH REMAINS TO BE PAYABLE ON THE LAST DAY OF THE FINANCIAL YEAR , IS NOT ATTRACTED. THEREFORE, ACCORDING TO THE APPELLAN TS, DISALLOWANCE CANNOT BE SUSTAINED. THIS CONTENTI ON WAS SOUGHT TO BE SUBSTANTIATED BY RELYING ON THE JUD GMENT OF THE ALLAHABAD HIGH COURT IN COMMISSIONER OF INCOME TAX V.VECTOR SHIPPING SERVICES (P) [(2013) 357 ITR 642 (ALL)] . PRIMARILY, THIS CONTENTION SHOULD BE ANSWERED WI TH REFERENCE TO THE LANGUAGE USED IN THE STATUTORY PROVISION. SECTION 40(A)(IA) MAKES IT CLEAR THAT THE CONSEQUENCE OF DISALLOWANCE IS ATTRACTED WHEN AN INDIVIDUAL, WHO IS LIABLE TO DEDUCT TAX ON ANY INTEREST PAYABLE TO A RESIDENT ON WHICH TAX IS DEDUCTIBLE AT SOURCE, COMMITS DEFAULT. THE LAN GUAGE OF ITA NO. 3085/14 :- 15 -: THE SECTION DOES NOT WARRANT AN INTERPRETATI ON THAT IT IS ATTRACTED ONLY IF THE INTEREST REMAINS PAYABLE ON THE LAST DAY OF THE FINANCIAL YEAR. IF THIS CONTENTION IS TO BE ACCEPTED, THIS COURT WILL HAVE TO ALTER THE LANGUAGE OF SECTI ON 40(A)(IA) AND SUCH AN INTERPRETATION IS NOT PERMISSIBLE. THI S VIEW THAT WE HAVE TAKEN IS SUPPORTED BY JUDGMENTS OF THE CALC UTTA HIGH COURT IN CRESCENT EXPORTS SYNDICATE AND ANOTHER [IT AT 20 OF 2013] AND THE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V. SIKANDADARKHAN N T UNVAR [ITA NOS.905 OF 2012 & CONNECTED CASES], WHICH HAVE BEEN RELIED ON BY THE TRIBUNAL. 6. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CONS IDERED OPINION THAT THE DECISION OF HYDERABAD BENCH OF THI S TRIBUNAL IN TEJA CONSTRUCTIONS (SUPRA) AND DECISION OF THIS TRIBUNAL IN THEEKATHIR PRESS MAY NOT BE APPLICABLE TO THE FACTS OF THIS CASE. U NDER THE SCHEME OF THE INCOME-TAX ACT, 1961, THE ASSESSEE HAS TO DEDU CT TAX ONLY AT THE TIME OF PAYMENT OR GIVING CREDIT, THEREFORE, THE AM OUNT WHICH WAS ALREADY PAID OR GIVEN CREDIT AND REMAINS PAYABLE IS ALSO SUBJECTED TO DISALLOWANCE U/S 40(A)(IA) OF THE ACT. THEREFORE, WE ARE UNABLE TO UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE. ACCO RDINGLY, THE ORDER OF THE LOWER AUTHORITY IS SET ASIDE AND THAT OF THE AS SESSING OFFICER IS RESTORED. 7. NOW COMING TO THE OTHER CONTENTION OF THE ASSESSEE THAT NO CONTRACT WAS GIVEN TO ANYONE AND THE ASSESSEE EXEC UTED THE WORK BY HIRING LORRIES, ACCORDING TO THE LD. COUNSEL, THE ASSESSEE HAS PAID ONLY HIRE CHARGES. THIS TRIBUNAL IS OF THE CONSIDERED O PINION THAT SECTION ITA NO. 3085/14 :- 16 -: 194I WAS AMENDED WITH EFFECT FROM 13.7.2006, THEREF ORE, PAYMENT OF RENT IS ALSO SUBJECTED TO DEDUCTION OF TAX U/S 194 I. SINCE THE APPLICATION OF SEC. 194I OF THE ACT HAS NOT BEEN CO NSIDERED BY EITHER OF THE LOWER AUTHORITIES, THIS TRIBUNAL IS OF THE CON SIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSIN G OFFICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE AND THE ISSUE OF DEDUCTION OF TAX IS REMITTED BACK TO THE F ILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RECONSIDER TH E ISSUE AFRESH AND FIND OUT WHETHER THE ASSESSEE IS LIABLE TO DEDUCT TAX U/S 194I OR NOT. WITH THE ABOVE DIRECTION, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH OF SEPTEMBER, 2015, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 4 TH SEPTEMBER, 2015 RD &' ()*) / COPY TO: 1 . / APPELLANT 3. +,' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF