M/s.Termo Penpol Ltd, Trivandrum V. The ACIT, Trivandrum

ITA 410/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81424 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 01-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: ANAND

Judgement Text

1 ITA NO.410/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. 410/COCH/2014 (ASSESSMENT YEAR 2006-07) M/S TERMO PENPOL LIMITED VS ACIT, CIR.1 1-2, JAWAHAR NAGAR THIRUVNANTHAPURAM KOWDIAR PO, TRIVANDRUM 695 003 PAN : AABCT2319K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANAND RESPONDENT BY : SHRI K.K. JOHN DATE OF HEARING : 04-12-2014 DATE OF PRONOUNCEMENT : 12-12-2014 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A), THIRUVANANTHAPURAM DATED 31-07-2014 FOR THE ASSESSMENT YEAR 2006-07. 2. SHRI ANAND, THE LD.COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISALLOWANCE OF R S. 23,03,617 AND RS. 35,63,645 BEING THE ECB INTEREST AND ROYALTY PAYMEN T FOR NON DEDUCTION OF TAX U/S 40(A)(IA) OF THE ACT. ACCORDING TO THE LD. COUNSEL, THE ALLAHABAD 2 ITA NO.410/COCH/2014 HIGH COURT IN THE CASE OF CIT VS VECTOR SHIPPING SE RVICES (P) LTD VIDE JUDGMENT DATED 31-07-2013 FOUND THAT WHAT IS TO BE DISALLOWED IS ONLY IN RESPECT OF THE AMOUNT REMAINS TO BE PAYABLE ON THE LAST DAY OF THE FINANCIAL YEAR. IN RESPECT OF AMOUNT ALREADY PAID, ACCORDING TO THE LD.COUNSEL, THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE. ALTERNATIVELY, THE LD.COUNSEL SUBMITTED THAT THE AS SESSEE HAS PAID THE AMOUNT IN THE SUBSEQUENT YEAR, THEREFORE, IN VIEW O F PROVISOS TO SECTION 40(A)(IA) AND PROVISO TO SECTION 40(A)(I) THE SAME HAS TO BE ALLOWED IN THE PREVIOUS YEAR IN WHICH THE TAX HAS BEEN PAID. SINC E ADMITTEDLY, THE ASSESSEE HAS PAID TAX IN SUBSEQUENT FINANCIAL YEAR, ACCORDING TO THE LD.COUNSEL, THE SAME HAS TO BE ALLOWED IN THE SUBSE QUENT ASSESSMENT YEAR. 3. WE HEARD SHRI K.K. JOHN, THE LD.DR ALSO. THE LD .DR VERY FAIRLY CONCEDED THAT IF THE ASSESSEE PAID THE TAX IN THE S UBSEQUENT ASSESSMENT YEAR THE SAME HAS TO BE ALLOWED IN THE YEAR IN WHIC H IT WAS ACTUALLY PAID. THEREFORE, THE DEPARTMENT MAY NOT HAVE ANY OBJECTIO N TO ALLOW THE CLAIM OF THE ASSESSEE IN THE SUBSEQUENT YEAR PROVIDED THE AS SESSEE ACTUALLY PAID THE TAX. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSU E WHETHER THE AMOUNT PAID BY THE ASSESSEE HAS TO BE DISALLOWED OR THE AM OUNT REMAINS TO BE 3 ITA NO.410/COCH/2014 PAID AS ON THE LAST DAY OF THE FINANCIAL YEAR HAS T O BE ALLOWED WAS THE ISSUE BEFORE THE VISAKHAPATNAM SPECIAL BENCH OF THI S TRIBUNAL IN MERLYN SHIPPING & TRANSPORTERS VS ACIT 146 TTJ 1 (VIZAG). THE SPECIAL BENCH FOUND THAT THE PROVISIONS OF SECTION 40(A)(IA) IS A PPLICABLE ONLY IN RESPECT OF THE AMOUNT REMAINS TO BE PAYABLE ON THE LAST DAY OF THE FINANCIAL YEAR. THIS DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN MERLYN SHIPPING & TRANSPORTERS (SUPRA) WAS REFERRED IN THE JUDGMENT O F THE ALLAHABAD HIGH COURT IN VECTOR SHIPPING SERVICES (P) LTD (SUPRA). THE SPECIAL LEAVE PETITION FILED BY THE REVENUE AGAINST THE JUDGMENT OF THE ALLAHABAD HIGH COURT IN VECTOR SHIPPING SERVICES (P) LTD (SUPRA) I S DISMISSED AT THE ADMISSION STAGE. THEREFORE, THE SUPREME COURT HAS NOT GONE INTO THE MERIT OF THE ISSUE. THE SUPREME COURT HAS NOT LAID DOWN ANY LAW. THEREFORE, THE DISMISSAL OF THE SPECIAL LEAVE PETIT ION AT THE ADMISSION STAGE CANNOT BE TREATED AS DECLARATION OF LAW UNDER ARTICLE 141 OF THE CONSTITUTION OF INDIA. HOWEVER, THE GUJARAT HIGH C OURT IN CIT VS SIKANDARKHAN N TUNVAR [357 ITR 312 (GUJ) AND THE CA LCUTTA HIGH COURT IN CRESCENT EXPORT SYNDICATE (ITA NO.23 OF 2013) EXAMINED THE ISSUE ELABORATELY AND FOUND THAT THE DECISION OF THE SPEC IAL BENCH IN MERLYN SHIPPING & TRANSPORTERS (SUPRA) IS NOT A GOOD LAW. FOR THE PURPOSE OF CLARITY WE ARE REPRODUCING THE OBSERVATIONS MADE BY THE CALCUTTA H IGH COURT AND GUJARAT HIGH COURT BELOW: 4 ITA NO.410/COCH/2014 CALCUTTA HIGH COURT IN CRESCENT EXPORTS SYNDICATE & ANOTHER (SUPRA) BEFORE DEALING WITH THE SUBMISSIONS OF THE LEARNE D COUNSEL APPEARING FOR THE ASSESSEES IN BOTH THE APP EALS WE HAVE TO EXAMINE THE CORRECTNESS OF THE MAJORITY VIE WS IN THE CASE OF MERILYN SHIPPING. WE ALREADY HAVE QUOTED EXTENSIVELY BOTH THE MAJORI TY AND THE MINORITY VIEWS EXPRESSED IN THE AFORESAID C ASE. THE MAIN THRUST OF THE MAJORITY VIEW IS BASED ON THE FA CT THAT THE LEGISLATURE HAS REPLACED THE EXPRESSION AMOUNTS CR EDITED OR PAID WITH THE EXPRESSION PAYABLE IN THE FINAL EN ACTMENT. COMPARISON BETWEEN THE PRE-AMENDMENT AND POST AMENDMENT LAW IS PERMISSIBLE FOR THE PURPOSE OF ASC ERTAINING THE MISCHIEF SOUGHT TO BE REMEDIED OR THE OBJECT SO UGHT TO BE ACHIEVED BY AN AMENDMENT. THIS IS PRECISELY WHAT W AS DONE 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 5 ITA NO.410/COCH/2014 SPECULATE AS TO THE EFFECT OF THE SO-CALLED REPRESE NTATIONS MADE BY THE PROFESSIONAL BODIES. THE LEARNED TRIBUNAL HELD THAT SECTION 40(A)(IA) OF THE ACT CREATES A LEGAL FICTION BY VIRTUE OF WHICH EVEN THE GENUINE AND ADMISSIBLE EXPENSES CLAIMED BY AN ASSESSEE UNDE R THE HEAD INCOME FROM BUSINESS AND PROFESSION: IF THE ASSESSEE DOES NOT DEDUCT TDS ON SUCH EXPENSES ARE DISALLOWED . HAVING HELD SO WAS IT OPEN TO THE TRIBUNAL TO SEEK TO JUSTIFY THAT THIS FICTION CANNOT BE EXTENDED ANY F URTHER AND, THEREFORE, CANNOT BE INVOKED BY ASSESSING OFFICER T O DISALLOW THE GENUINE AND REASONABLE EXPENDITURE ON THE AMOUN TS OF EXPENDITURE ALREADY PAID? DOES THIS NOT AMOUNT TO DELIBERATELY READING SOMETHING IN THE LAW WHICH IS NOT THERE? WE, AS SUCH, HAVE NO DOUBT IN OUR MIND THAT THE LEARNED TRIBUNAL REALIZED THE MEANING AND PURPORT O F SECTION 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:- 6 ITA NO.410/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 SUPPLYING OF THIS CASUS OMISSUS WOULD BE EXTREMELY 7 ITA NO.410/COCH/2014 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 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 8 ITA NO.410/COCH/2014 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 MERILYN SHIPPING & TRANSPORTS ARE NOT ACCEPTABLE. THE SUBMISSIONS ADV ANCED BY LEARNED ADVOCATES HAVE ALREADY BEEN DEALT WITH AND REJECTED. GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR(SUPRA) 23. DESPITE THIS NARROW INTERPRETATION OF SECTION 40(A)(IA), THE QUESTION STILL SURVIVES IF THE TRIBUNAL IN CASE OF M/S MERILYN SHIPPING & TRANSPORS VS. ACIT (SUPRA) WAS ACCURATE IN ITS OPINION. IN THIS CONTEXT, WE WOULD LIKE TO EXAMINE TWO ASPECTS. FIRSTLY, WHAT WOULD BE THE CO RRECT 9 ITA NO.410/COCH/2014 INTERPRETATION OF THE SAID PROVISION. SECONDLY, WH ETHER OUR SUCH UNDERSTANDING OF THE LANGUAGE USED BY THE LEGI SLATURE SHOULD WAVER ON THE PREMISE THAT AS PROPOUNDED BY T HE TRIBUNAL, THIS WAS A CASE OF CONSCIOUS OMISSION ON THE PART OF THE PARLIAMENT. BOTH THESE ASPECTS WE WOULD ADDRES S ONE AFTER ANOTHER. IF ONE LOOKS CLOSELY TO THE PROVISI ON, IN QUESTION, ADVERSE CONSEQUENCES OF NOT BEING ABLE TO CLAIM DED UCTION ON CERTAIN PAYMENTS IRRESPECTIVE OF THE PROVISIONS CON TAINED IN SECTIONS 30 TO 38 OF THE ACT WOULD FLOW IF THE FOLL OWING REQUIREMENTS ARE SATISFIED:- (A) THERE IS INTEREST, COMMISSION OR BROKERAGE, REN T, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICA L SERVICES PAYABLE TO RESIDENT OR AMOUNTS PAYABLE TO A CONTRAC TOR OR SUB-CONTRACTOR BEING RESIDENT FOR CARRYING OUT ANY WORK. (B) THESE AMOUNTS ARE SUCH ON WHICH TAX IS DEDUCTIB LE AT SOURCE UNDER XVIII-B. (C) SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTI ON HAS NOT BEEN PAID ON OR BEFORE DUE DATE SPECIFIED IN SUB-SE CTION (1) OF SECTION 39. FOR THE PURPOSE OF CURRENT DISCUSSION REFERENCE TO THE PROVISO IS NOT NECESSARY. 24. WHAT THIS SUB-SECTION, THEREFORE, REQUIRES IS T HAT THERE SHOULD BE AN AMOUNT PAYABLE IN THE NATURE DESCRIBED ABOVE, WHICH IS SUCH ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B BUT SUCH TAX HAS NOT BEEN DEDUCTED O R IF DEDUCTED NOT PAID BEFORE THE DUE DATE. THIS PROVIS ION NOWHERE REQUIRES THAT THE AMOUNT WHICH IS PAYABLE M UST REMAIN SO PAYABLE THROUGHOUT DURING THE YEAR. TO R EITERATE THE PROVISION HAS CERTAIN STRICT AND STRINGENT REQU IREMENTS 10 ITA NO.410/COCH/2014 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 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 11 ITA NO.410/COCH/2014 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 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 B E JUDGED WITH REFERENCE TO SUCH DATE, DOES NOT MEAN THAT WHE THER AN AMOUNT IS PAYABLE OR NOT MUST BE ASCERTAINED ON THE STRENGTH OF THE POSITION EMERGING ON 31T MARCH. 25. THIS BRINGS US TO THE SECOND ASPECT OF THIS DIS CUSSION, NAMELY, WHETHER THIS IS A CASE OF CONSCIOUS OMISSIO N AND THEREFORE, THE LEGISLATURE MUST BE SEEN TO HAVE DEL IBERATELY BROUGHT ABOUT A CERTAIN SITUATION WHICH DOES NOT RE QUIRE ANY FURTHER INTERPRETATION. THIS IS THE FUNDAMENTAL AR GUMENT OF THE 12 ITA NO.410/COCH/2014 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, 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 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. 5. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT THE CIT(A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE S INCE THE ASSESSEE HAS NOT ADMITTEDLY DEDUCTED TAX AT THE TIME OF MAKING P AYMENT. 13 ITA NO.410/COCH/2014 6. NOW COMING TO THE ALTERNATIVE CONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE THAT IT HAS TO BE ALLOWED IN THE YEAR IN W HICH THE TAX WAS PAID, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IN VIEW OF PROVISOS TO SECTION 40(A)(IA) AND 40(A)(I) THE DEDUCTION CLAIMED BY THE ASSESSEE HAS TO BE ALLOWED IN THE YEAR IN WHICH THE TAX WAS ACTUALLY P AID BY THE ASSESSEE. THE LD.DR ALSO HAS NO OBJECTION TO ALLOW THE CLAIM OF THE ASSESSEE IN THE YEAR IN WHICH THE TAX WAS ACTUALLY PAID BY THE ASSE SSEE. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER SHALL VERIFY THE ACTUA L PAYMENT OF TAX BY THE ASSESSEE ON THE EXPENDITURE CLAIMED AND THEREAFTER ALLOW THE CLAIM IN THE YEAR IN WHICH THE TAX WAS ACTUALLY PAID. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DECEMBER, 2014. SD/- SD/- (CHANDRA POOJARI) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 12 TH DECEMBER, 2014 PK/- COPY TO: 1. M/S TERUMO PENPOL LIMITED 1-2, JAWAHAR NAGAR, KO WDIAR PO, TRIVANDRUM 695 003 2. THE ACIT, CIR.1, THIRUVANANTHAPURAM 3. THE COMMISSIONER OF INCOME-TAX, THIRUVANANTHAPUR AM 4. THE COMMISSIONER OF INCOME-TAX(A), KOWDIAR, THIR UVANANTHAPURAM 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH